No universal "should"—it depends on your goals (growth, fairness definitions, revenue needs, incentives), but evidence leans against simply hiking top marginal rates further as a free lunch. Current systems in places like the US are already progressive; the wealthy (top 1% or 0.1%) pay the large majority of income taxes, and further hikes face real trade-offs in behavior, growth, avoidance, and capital flight. Here's a breakdown grounded in data and mechanisms rather than slogans.
Current Reality, Not Rhetoric
•Progressivity already exists: In the US, the top federal marginal income tax rate is 37% (plus state taxes that can push combined rates over 50% in CA/NY). Capital gains/dividends face 20% + 3.8% NIIT. The top 1% earn ~20-26% of AGI but pay ~40% of federal income taxes; the top 0.1% pay a wildly disproportionate share. Effective rates for ultra-high earners are often lower than statutory peaks due to realization (not mark-to-market), charitable giving, and investment income—but they still dwarf middle-class effective rates. OECD data and IRS SOI tables consistently show this. "The rich pay nothing" is false.
•Historical peaks were not magic: Top US rates hit 70-91% in mid-20th century, but with massive deductions/exclusions, few paid them, base was narrower, and growth/post-war catch-up occurred despite (not because of) them. Revenue as % of GDP did not scale linearly with rates (see Treasury and CBO historical series). European high-tax countries often pair this with VAT/consumption taxes that hit everyone and still face stagnation or emigration of talent/capital.
•Wealth ≠ annual income: Much "wealth" is unrealized appreciation in businesses/stock. Taxing it annually (wealth taxes) creates liquidity problems, valuation fights, and has failed or been repealed in most places that tried (France, Sweden, etc.) due to capital flight and low yield.
Arguments For Higher Rates on the Wealthy
•Ability-to-pay and public goods: Marginal utility of money falls; a billionaire forgoing a yacht funds more schools/roads/defense than the same dollars from median earners. If you prioritize reducing consumption inequality or funding specific transfers/infrastructure without broad-based taxes, higher top rates or closing preferential treatment (carried interest, step-up basis) can raise revenue progressively. Some empirical work (Piketty et al.) claims limited distortion at moderate hikes.
•Political economy: Extreme concentration can buy influence; taxes as a counter. Pigouvian angle if certain wealth derives from rents/monopoly rather than value creation.
•These are strongest when revenue is targeted efficiently and rates stay below the point of sharp behavioral response.
Arguments Against (Stronger on Evidence for Large Hikes)
•Incentives and growth (Laffer is real, not cartoon): Labor supply, entrepreneurship, investment, and risk-taking respond to after-tax returns—especially at the top where people have options (retire early, invest abroad, shift to non-taxed forms). Diamond-Saez optimal top rate estimates (~70%+ including all taxes) assume away many elasticities and international mobility; real-world elasticities for high earners are higher (see Gruber-Saez, and more recent work). Post-1980s US rate cuts broadened the base and coincided with revenue growth from the top and expansion; Europe’s higher rates correlate with lower dynamic growth and tech dynamism. Capital is mobile; talent is mobile.
•Who actually pays / deadweight loss: Corporations pass taxes to workers/customers via lower wages/higher prices (incidence studies). High statutory rates increase avoidance (legal) and evasion, complexity, and lobbying for loopholes—resources wasted. Government spending has its own inefficiencies and rent-seeking; more revenue does not automatically equal better outcomes (see growth accounting and cross-country fiscal studies).
•Fairness is contested: If wealth comes from creating value others voluntarily pay for (tech, scale businesses), heavy redistribution can punish success and reduce the pie. "Deserve" arguments cut both ways—inheritance vs. self-made, luck vs. effort. Static snapshots ignore lifetime mobility and that most rich are not idle coupon-clippers.
•Empirical track record of pure rate hikes: Wealth taxes raised little and were ditched; millionaire taxes in states triggered out-migration (IRS migration data, Stanford/MIT studies on millionaire taxes). Revenue-maximizing rates exist and are finite. Inequality metrics (Gini, top shares) rose with globalization/tech even as absolute living standards rose dramatically for the bottom/middle—absolute poverty matters more than ratios for welfare.
Trade-offs and Better Levers
If the goal is revenue + growth: broaden base (fewer deductions), lower rates, shift toward consumption/land-value taxes (less distortionary), improve compliance, or tax negative externalities. Preferential capital gains treatment exists partly because of double-taxation of corporate income and to encourage investment—scrapping it without rate cuts has costs. For inequality concerns, focus on pre-tax factors: education, housing supply, occupational licensing, immigration skill mix, and competition policy beat pure fiscal transfers for durable gains. Extreme top rates signal hostility to capital formation that compounds into lower wages over decades.
Data sources worth checking directly: IRS Statistics of Income, CBO distribution tables, OECD Revenue Statistics, NBER working papers on taxable income elasticities, and historical BEA/Treasury series. Outcomes depend on how you tax (income vs. consumption vs. wealth; statutory vs. effective; mobile vs. immobile bases) far more than moral fervor about "the wealthy." If your metric is maximizing long-run broad prosperity rather than punishing success or equalizing outcomes, further hikes on current top rates are usually poor policy.