No consensus exists; it depends on values (fairness, growth, inequality aversion), empirical assumptions about elasticities/behavior, and definitions of "wealthy" and "currently." Different societies and economists reach opposing conclusions based on trade-offs between equity, efficiency, revenue, and incentives. Below are the strongest arguments and evidence on each side, focused primarily on the US (the most common reference point), with notes on measurement issues.
Arguments for higher tax rates on the wealthy
•Ability to pay and progressive fairness: Marginal utility of income declines at high levels, so equal sacrifice implies higher rates on high earners. The US already has a progressive statutory structure (top federal income tax rate 37% + state taxes + payroll/NIIT), but effective rates for the top 0.1% or billionaires are often lower due to preferential capital gains/dividends rates (20% + 3.8%), carried interest, unrealized gains, and deductions. Analyses (e.g., Treasury, CBO, some academic work using tax data) show the top 1% pay a large share of income taxes (~40% of federal income taxes) but a smaller share of all taxes when including payroll, sales, property, and corporate. Proponents cite rising wealth concentration (top 1% wealth share ~30-35% per Saez/Zucman or Fed SCF data) and argue higher rates fund public goods, reduce after-tax inequality, or address "rent-seeking."
•Revenue and fiscal needs: High earners have capacity; historical US top marginal rates exceeded 70-90% (pre-1960s/1980s) amid strong growth periods. Some European countries sustain higher top rates + wealth/ inheritance taxes. Behavioral responses exist but are not infinite—revenue-maximizing top rates are estimated in the 50-70%+ range in some optimal tax models (Diamond-Saez and extensions) under certain elasticity assumptions, especially if including externalities from inequality or political influence.
•Evidence on limited harm: Short-run taxable income elasticities for top earners are positive but often 0.2-0.5 in US studies (not 1+); much response is avoidance/timing rather than real labor supply reduction. Wealth taxes or higher capital taxes can target unrealized appreciation that income taxes miss. Inequality metrics (Gini, top shares) have risen since the 1980s alongside rate cuts; some link this to slower mobility or social cohesion costs.
Arguments against higher tax rates on the wealthy
•Incentives, growth, and efficiency: High marginal rates discourage work, entrepreneurship, investment, and risk-taking (human capital and capital accumulation). Capital is mobile; higher rates on capital gains, corporations, or wealth can reduce investment, wages for others, and innovation. The Laffer curve is real—rates past a point reduce revenue via avoidance, evasion, emigration, or less activity. US post-1980s rate cuts (and 2017 TCJA) correlated with revenue growth from high earners in absolute terms and expanded tax base; top 1% income share rose but so did real incomes across quintiles in many periods. Cross-country data show high-tax jurisdictions can have brain drain or capital flight.
•Effective rates and base realities already high or mismeasured: Including all taxes (corporate incidence, which falls partly on capital/owners, plus state/local), top groups often face effective rates of 30-45%+ depending on the study (CBO, Joint Committee, some Auten-Splinter vs. Piketty-Saez-Zucman debates). Much "wealth" is unrealized/illiquid (private business, homes) or retirement accounts; taxing it marks-to-market creates liquidity/valuation problems, volatility, and double-taxation concerns. Statutory rate hikes often miss the mark via loopholes; broadening the base (fewer deductions, economic income definition) is preferable to rate increases. Consumption or land-value taxes can be more efficient.
•Empirical and practical limits: Historical high statutory rates had narrow bases and high avoidance. Wealth taxes in Europe were largely repealed due to administrative cost, capital flight, and low revenue. Behavioral responses rise with rates and enforcement difficulty (offshore, trusts, munis). Growth effects compound: lower investment today reduces future wages/tax base. If the goal is revenue for specific programs, spending efficiency and deadweight loss matter; if redistribution, transfers/EITC-style policies can target better than rate hikes that also hit upper-middle professionals.
Key evidence and measurement caveats
•Current US picture (approx., federal + rough effective): Top statutory ordinary rate 37%; long-term cap gains 20%+3.8%. IRS SOI: top 1% AGI group pays ~40% of income tax; top 0.1% higher still. Effective federal rates progress but flatten or dip at the extreme top due to capital income (debated in Piketty/Saez/Zucman vs. Auten/Splinter or Treasury data—methodological differences on incidence, untaxed income, and distribution). State taxes add 0-13%. Overall tax-to-GDP ~25-27%; OECD peers vary.
•Elasticities and growth: Literature (Saez, Gruber, Goolsbee, etc.) finds taxable income elasticity higher for top earners; real responses smaller. Macro: top rate cuts sometimes boost reported income; causality with GDP growth is confounded (tech, trade, skills). Nordic high-tax models pair rates with broad bases, cultural compliance, and less pure progressive income focus.
•Inequality: Top income/wealth shares rose since ~1980 (tax data, SCF, national accounts). Causes include technology, globalization, superstar effects, assortative mating, and policy—not solely tax rates. Absolute poverty fell; mobility data mixed.
•International: Top rates 40-55%+ common in Europe with VAT; US relies more on income/payroll. Wealth taxes rare and small-yield now.
Trade-offs and better framing
"Higher than currently" requires specifying ordinary income vs. capital, federal vs. total, average vs. marginal, and realization vs. accrual. Static scoring overstates revenue; dynamic scoring is uncertain. Deadweight loss rises with the square of the rate. Politics and administration matter: complex rules invite avoidance and lobbying.
If your priority is maximizing growth/innovation and you view high earners as creating surplus, lower/ flatter rates + broad base look better. If you prioritize reducing top-end inequality or funding large transfers/public investment and view elasticities as low, higher rates (or wealth/accession taxes) look better. Hybrid views emphasize base-broadening, consumption taxation, or negative income taxes over pure rate hikes. Data updates (CBO, IRS, OECD, academic replications) continually refine estimates; ideology often drives which studies people emphasize.
For deeper reading: Saez/Zucman on distribution and optimal rates; Auten/Splinter or Magness critiques; Mirrlees review; CBO distribution tables; elasticity surveys by Saez/Slemrod/Giertz. Specific proposals (wealth tax, cap gains as ordinary, etc.) have distinct incidence and avoidance profiles.