Short answer: it depends on your goals. If you want to reduce inequality and raise revenue for public investment with limited economic side‑effects, there’s a solid case for moderately higher effective taxes on very high incomes and large fortunes—achieved mainly by base‑broadening and better enforcement rather than big jumps in headline rates. If your top priority is minimizing any potential drag on investment or risk‑taking, you’d lean against higher rates and focus on simplifying the code and taxing consumption instead.
Key arguments for higher taxes on the wealthy
•Fairness/ability to pay: A dollar is worth less to someone already very well off; “vertical equity” supports higher rates at the top.
•Revenue for high‑return spending: Education, R&D, and infrastructure can yield social returns that exceed the efficiency costs of taxation.
•Inequality externalities: Very high concentration of income/wealth may harm mobility, political equality, and social cohesion.
•Low elasticities at the very top (when avoidance is curbed): Empirical work generally finds taxable income responds to rate increases, but not so strongly that revenue falls with moderate hikes; avoidance/enforcement design matters.
Key arguments against
•Investment and entrepreneurship: Higher marginal and capital taxes can reduce risk‑taking, savings, and capital formation, especially if poorly designed.
•Mobility/avoidance: The wealthy have more scope to shift timing, form, or location of income; rate hikes without base‑broadening can underperform.
•Salience of state/local taxes: In high‑tax states, combined burdens may start to bite more.
•Administrative complexity: Wealth or mark‑to‑market taxes are hard to value and enforce at scale.
What the research tends to find (high level)
•The “elasticity of taxable income” for top earners is positive but modest; well‑targeted base‑broadening and enforcement can keep efficiency costs lower than headline rate hikes alone.
•Revenue‑maximizing top rates in standard models are generally higher than current effective rates in the U.S., but the exact number depends heavily on how well you limit avoidance and whether you raise capital taxes or only labor taxes.
•Growth effects of moderate top‑rate increases are mixed in the literature and usually small relative to the size of the change; design details dominate.
If you do raise the burden, approaches with better cost‑benefit ratios
•Align capital gains and dividend rates more closely with ordinary income at very high incomes, while expanding deferral/offsets for genuine small‑business investment.
•Close well‑known avoidance channels (carried interest conversion, certain pass‑through mismatches, aggressive valuation discounts).
•Tax large unrealized gains at death (ending “step‑up”) or impose an interest charge on very long deferrals; pair with high exemptions to protect typical households.
•Strengthen IRS high‑net‑worth enforcement and information reporting; this raises revenue even without changing statutory rates.
•Consider a surtax limited to extremely high adjusted gross income (e.g., 5–10% above a very high threshold) rather than big bracket shifts lower down.
Bottom line
•A modest increase in effective taxes on the ultra‑wealthy—done via base‑broadening, improved enforcement, and better alignment of capital and labor income—likely raises meaningful revenue with limited efficiency costs. Very large hikes in top statutory rates or ambitious annual wealth taxes carry higher risks of avoidance, valuation disputes, and potential investment effects.
If you share your policy goals (e.g., target revenue, inequality concerns, growth priorities) and which country/state you have in mind, I can sketch a concrete package and its trade‑offs.