Short answer: It depends on what you’re trying to optimize (fairness, revenue, growth, simplicity). If the goal is to reduce deficits and wealth inequality with minimal drag on growth, then modestly higher effective taxes on the very top—achieved mainly by base‑broadening and better taxing capital income—are defensible. Huge hikes to headline labor‑income rates alone are less effective and more prone to avoidance.
How to think about it
•Arguments for higher top rates: Diminishing marginal utility (a dollar means less to the very rich), persistent wealth concentration, and the need to fund public goods. Carefully designed increases can raise meaningful revenue with limited real‑economy effects if they curb avoidance and target very high thresholds.
•Arguments against: Behavioral responses (income shifting, timing, migration), potential dampening of entrepreneurship and risk‑taking, and added complexity if changes are piecemeal or poorly coordinated.
What tends to work better than just raising the top wage rate
•Narrow loopholes and preferences: Cap or phase down high‑end deductions; strengthen anti‑avoidance rules.
•Tax capital income more consistently: Bring top capital‑gains/dividend rates closer to top wage rates, pair with measures like longer holding‑period discounts or “look‑back/deferral charges” to avoid lock‑in, and limit the step‑up in basis at death with sensible exemptions.
•Minimum effective tax at the very top: A well‑designed minimum tax or surtax for ultra‑high incomes/wealth can raise revenue while reducing gamesmanship.
•Enforcement and reporting: Better third‑party reporting and audit capacity often raise more—at lower efficiency cost—than large rate hikes.
If you want my policy recommendation (assuming the U.S. and focusing on the top 0.1%):
•Raise effective taxes modestly at the very top primarily by aligning capital‑income taxation with wage rates, tightening deductions, limiting step‑up in basis above a high exemption, and adding a targeted surtax/minimum tax on ultra‑high incomes.
•Keep headline top labor‑income rates changes small unless paired with strong base‑broadening and anti‑avoidance rules.
•Reinvest added revenue in high‑return public goods (childhood health/education, basic research) and in making work pay (e.g., wage subsidies/EITC), which supports long‑run growth.
If you tell me which country you have in mind, what you consider “wealthy” (e.g., top 1%, $1M+ income, $50M+ wealth), and whether your priority is fairness, revenue, or growth, I can sketch a concrete package with trade‑off estimates.