No single "should" exists; it depends on trade-offs between equity, efficiency, growth, revenue needs, and values. Higher rates on the wealthy are already a feature of most progressive systems (including the US), and whether to raise them further is an empirical + philosophical question with strong arguments and evidence on both sides. Blind ideology either way ignores incentives, incidence, and real-world elasticities.
Current reality (primarily US-focused, as the common reference)
•The US federal income tax is progressive: statutory top marginal rate is 37% (plus state taxes that can push combined rates over 50% in high-tax states; NIIT and other add-ons apply). Capital gains/dividends face preferential rates (0/15/20% + NIIT).
•Effective rates are lower due to deductions, credits, realization timing, and income composition, but the top 1% and 0.1% still pay the large majority of federal income taxes and a disproportionate share relative to their income. CBO, IRS SOI, and Treasury data consistently show this. Payroll, sales, and property taxes are less progressive or regressive.
•Wealth (as opposed to income) is harder to tax annually without valuation, liquidity, and avoidance problems; most "tax the rich" debates mix income, capital gains, estates, and proposed wealth taxes.
•Historically, top US statutory rates were much higher (70-90%+ mid-20th century), but effective rates and the tax base differed dramatically (more loopholes, different economy). Cross-country, Nordic/high-tax models pair high rates with broad bases, high compliance, and cultural factors; they are not pure "soak the rich" systems.
Arguments for higher rates on the wealthy
•Ability-to-pay and marginal utility: An extra dollar has less utility to a billionaire than to a median earner. Progressive taxation can fund public goods (infrastructure, basic research, safety nets, defense) with less hardship.
•Inequality and externalities: Extreme concentration can entrench political power, reduce social mobility, or create instability. If you view high inequality as a problem in itself (or as generating negative externalities), higher rates or wealth taxes are a direct lever. Piketty-style views emphasize r > g dynamics.
•Revenue without broad pain: The right tail has a large share of taxable capacity. In a high-debt environment with aging populations and entitlement growth, some see this as preferable to broad-based taxes or cuts.
•Empirical claims of limited harm: Some studies (and periods of higher rates) find modest labor supply responses for top earners; much income is rents, luck, or superstar effects rather than pure marginal product. Behavioral responses can be partly mitigated by base-broadening and enforcement.
•Fairness of the overall system: Preferential capital treatment, carried interest, stepped-up basis, and avoidance opportunities mean some high-wealth individuals face lower effective rates than wage earners. Closing this via higher ordinary rates or reforms is framed as restoring progressivity.
Arguments against higher rates
•Incentives, growth, and incidence: Taxes create deadweight loss. High marginal rates reduce work, saving, investment, risk-taking, and entrepreneurship—the activities that generate the tax base and raise living standards. Elasticity of taxable income for high earners is often estimated as non-trivial (0.2–0.7+ range in literature); responses include less realization of gains, more deferral, migration, and recharacterization. The wealthy are mobile; capital flees. Much of the burden can fall on workers via lower wages/capital stock (Harberger, etc.).
•Laffer and revenue realities: Beyond a point, higher rates reduce revenue (or raise less than static scores). Top earners already supply most income-tax revenue; chasing them harder can shrink the pie. Historical high statutory rates did not produce proportionally high effective collections.
•Fairness and double taxation: Income is taxed when earned; capital gains often reflect already-taxed corporate earnings or inflation. "The rich" is not a static class—mobility exists, and many high earners are temporary (careers, liquidity events). Punitive rates can punish success after the fact. Government spending efficiency is low in many domains; more revenue does not automatically mean better outcomes.
•Practical problems: Wealth taxes face severe valuation, liquidity, privacy, and avoidance issues (see European experiments that were mostly repealed). Higher rates increase complexity, lobbying for loopholes, and distortion toward tax-favored assets. Corporate and pass-through responses matter.
•Alternatives often superior: Broaden the base, lower rates, tax consumption (less distortionary to saving/investment), improve enforcement, or means-test spending. Growth and absolute mobility have historically done more for the non-rich than redistribution alone. Cross-country evidence does not show a simple "higher top rates → better median outcomes" pattern once you control for institutions, human capital, and culture.
Evidence is mixed and context-dependent
Economic literature (Saez, Piketty, Diamond-Saez optimal tax work on one side; Mankiw, Feldstein, Gruber-Saez elasticities, and growth regressions on the other) does not yield a consensus number for the "optimal" top rate. It depends on assumed social welfare weights, behavioral elasticities, existing distortions, and whether you prioritize equality of outcomes vs. opportunity. High-tax, high-trust, homogeneous societies differ from large, diverse, mobile ones. Avoidance/evasion, international tax competition (OECD BEPS, etc.), and state-level variation further complicate it. Static distributional tables ignore dynamics.
Empirically:
•Top rates can raise revenue up to a point, but chasing very high rates often yields diminishing or negative returns after behavioral response.
•Inequality metrics (Gini, top shares) rose with technology, globalization, and assortative mating as much as tax policy; pre-tax inequality matters.
•Places that cut top rates (US 1980s, various reforms) sometimes saw base expansion and growth; causation is hard. High-tax jurisdictions can thrive with other strengths (rule of law, education) and suffer without them.
Trade-offs and better questions
If the goal is pure revenue for valued spending with minimal distortion, pair moderate progressivity with a broad base, consumption elements, and spending restraint. If the goal is reducing top wealth shares as an end, expect efficiency costs and capital flight—quantify them. "Higher than currently" needs a number, a base definition (income vs. wealth vs. estates), and an alternative (what replaces the revenue or what spending falls). Demagoguery about "fair share" ignores that shares are already progressive by construction; "they can afford it" ignores incentives and ownership of capital that employs people.
For deeper reading: CBO/JCT distributional analyses and revenue estimates; elasticity surveys (Saez, Gruber); optimal tax theory (Mirrlees, Diamond-Saez, with critiques); historical effective rate series (Piketty-Saez vs. more comprehensive Treasury/IRS); and cross-country OECD data. Policy should start from mechanisms and evidence, not slogans.