No universal "should"—it depends on priorities like growth, revenue stability, inequality reduction, and empirical trade-offs. Higher statutory rates on the wealthy have clear costs and limited proven benefits beyond symbolism; base-broadening, closing preferences, and taxing consumption/economic rents often outperform pure rate hikes.
Current Reality (Primarily US-Focused, as the Most Debated Case)
•Top federal marginal income tax rate is 37% (plus state taxes in many places, NIIT 3.8% on investment income). Long-term capital gains and qualified dividends top out at 20% + 3.8%.
•Effective rates matter more than marginal: IRS and CBO data show the top 1% and 0.1% pay the large majority of federal income taxes (top 1% pay ~40%+ of individual income taxes while earning ~20-26% of AGI). Their average federal effective rates are higher than middle quintiles', but this varies sharply by income composition. Labor income faces ordinary rates + payroll taxes; capital income, carried interest, and unrealized gains face lower or deferred rates. Warren Buffett's secretary comparison is real for some ultra-wealthy with heavy unrealized/asset income.
•Including payroll, sales, property, and corporate taxes (borne partly by owners/capital), the system is progressive overall, but less so at the extreme tail when wealth (not just annual income) is considered. OECD comparisons show the US already relies heavily on progressive income taxes relative to many peers that use more VAT/consumption taxes.
•"Wealthy" is slippery: top 1% threshold is roughly $700k+ AGI; billionaires are a tiny subset whose wealth is mostly illiquid/corporate equity.
Historically, US top marginal rates exceeded 70-90% (1950s-60s), but with narrow bases, rampant shelters, and different capital controls. Revenue as % of GDP did not permanently soar with those rates; the post-1980s broader base + lower rates period saw strong revenue growth alongside expansion.
Arguments For Higher Rates on the Wealthy
•Ability to pay and declining marginal utility: An extra dollar funds less consumption/welfare for a billionaire than for median households. Progressive taxation can finance public goods, infrastructure, R&D spillovers, or transfers without as much distortion on lower earners.
•Inequality and political economy: High wealth concentration (Piketty-Saez-Zucman data, with caveats on measurement and mobility) can amplify influence, rent-seeking, and barriers to entry. Some empirical work links top inequality to reduced mobility or social cohesion, though causation is contested and absolute living standards have risen.
•Revenue at the top: The right tail has high ability to pay and, in static models, can yield revenue. Places with very high top rates (some Nordic countries, historically) combine them with trust, enforcement, and cultural factors. If the goal is redistribution or specific spending, targeting high earners is more efficient than broad middle-class taxes.
•Behavioral evidence is mixed: some studies find modest labor supply responses for top earners; much response is tax planning rather than "working less."
Arguments Against (or for Restraint)
•Incentives, growth, and Laffer effects: High marginal rates reduce returns to work, entrepreneurship, investment, and risk-taking—the activities that generate the taxable income and jobs. Elasticity of taxable income for high earners is significant (Saez, Gruber, etc.); people shift to deferred comp, munis, pass-throughs, or relocate. Corporate and capital taxation ultimately burdens workers via lower wages/capital stock (Harberger, more recent open-economy studies). Cross-country and US state evidence shows high-tax jurisdictions lose mobile capital and talent.
•Avoidance, evasion, and administration: Statutory rate hikes without base-broadening invite shelters, inversion, and underreporting. Wealth taxes (as tried in Europe) raised little net revenue, were complex/valuing illiquid assets, and were mostly repealed due to capital flight and admin costs. Unrealized capital gains taxes create lock-in, valuation fights, and liquidity problems.
•Revenue reality and incidence: The top already funds a disproportionate share. Aggressive hikes can shrink the base (see behavioral responses post-2013 or historical). Much "rich" income is business income that employs people; double-taxing corporate profits + dividends/capital gains is common. Static scoring overstates gains; dynamic scoring and CBO/JCT often show smaller net effects.
•Fairness and definition problems: Many high earners are not idle heirs—they are current professionals, founders, or dual-income households in high-cost areas. Mobility data show substantial churn in and out of top fractiles. "Pay their fair share" is rhetorical; effective rates already rise with income for most, and consumption or lifetime taxes can be fairer. Retaliatory high rates can punish success without fixing root drivers of inequality (skills, family structure, housing/education policy, tech/globalization).
•Empirics on "soak the rich" delivering broad prosperity are weak. High-growth periods and places often feature competitive taxation of capital and talent (post-WWII US had unique advantages; modern Scandinavia has lower corporate rates, wealth taxes largely gone, and high consumption/ labor taxes with broad bases). Transfers and public services matter more for bottom-end outcomes than top marginal rates alone.
Better Levers Than Simple Rate Hikes
If the goal is revenue + progressivity without maximum distortion: broaden the base (limit deductions, preferential rates for carried interest/step-up basis carefully), shift toward land-value or consumption taxes (less elastic), improve enforcement/IRS capability on pass-throughs and international, tax negative externalities, or means-test benefits. Growth-oriented policy (skills, housing supply, competition) expands the pie and tax base more reliably than pure redistribution. Extreme concentration sometimes reflects winner-take-most markets better fixed by antitrust or IP reform than confiscatory rates.
Data sources worth checking directly: IRS SOI, CBO distribution tables, OECD Revenue Statistics, NBER working papers on ETI (elasticity of taxable income), and historical Treasury/OMB receipts. Outcomes depend on design details, enforcement, and what the revenue buys—not slogans. Trade-offs are real; evidence favors moderate progressivity with emphasis on growth and base quality over repeatedly "higher than currently."