Should the wealthy pay a higher tax rate than they currently do?

This question has strong arguments on both sides — I'll review current tax rates and the latest evidence to lay them out.

Should the wealthy pay a higher tax rate than they currently do is one of the most debated fiscal questions in the U.S. There is no consensus among economists, but the core arguments are:

What "currently do" means

Most proposals to make the wealthy "pay more" would not just raise the 37% rate but would:

Arguments For a Higher Rate

> Proponents argue that taxing the wealthy at a higher rate is a matter of fairness and social responsibility while opponents believe it could stifle economic growth and discourage investment.

Specific arguments for include:

1. Fairness and ability to pay: Those in favor argue it is a way to address income inequality and ensure that everyone pays their fair share towards public services and infrastructure. They contend that the wealthy have the means to contribute more to society and that progressive taxation can help redistribute, and supporters argue the wealthy benefit disproportionately from infrastructure, rule of law and stable financial systems and thus should contribute more.

2. Reduce inequality and fund public goods: By taxing the wealthy at a higher rate, the government can provide much-needed resources for social programs, infrastructure, and education, ultimately benefiting all members of society. Progressive revenue-financed infrastructure, education, and R&D raise productivity and long-run growth potential.

3. Raise revenue and reduce deficits: Arguments for raising the tax rates on high-income taxpayers start with the need to raise additional revenue and to signal the beginning of an effort by the United States to reduce its deficit. This policy is viewed as collecting revenue from taxpayers with the most income, who received the biggest Bush tax cuts, and who are least likely to reduce their consumption spending or work effort in response to an increase in their marginal tax rate.

Empirical evidence cited by supporters notes that cross-country studies show progressive taxation reduces inequality and funds useful public goods without catastrophic economic damage when changes are moderate and combined with strong administration, and one analysis found that higher taxes on the rich do not impede economic growth, investment or job creation.

Arguments Against a Higher Rate

1. Economic growth and investment: Opponents argue that higher taxes on the wealthy could have detrimental effects on economic growth. They contend that the affluent are often job creators and investors, and imposing heavier tax burdens on them might discourage entrepreneurship and investment, and could disincentivize people from putting in the hard work... thereby stunting economic growth.

Higher tax rates in the top brackets are seen as a negative incentive for small business growth, investment, and employment.

2. Avoidance, evasion and capital flight: Critics argue that higher taxes on the wealthy could discourage investment and entrepreneurship, potentially slowing economic growth. They also contend that the wealthy often have the means to avoid higher taxes, which could lead to a decrease in tax revenue. High wealth taxes might encourage the wealthy to move their assets or themselves to jurisdictions with lower taxes, reducing the domestic tax base. Example cited: New Jersey lost approximately $140–400 MILLION in tax revenue when ONE billionaire hedge funder, David Tepper, left the state due to onerous income and estate taxes.

Other distortions include: Higher tax rates on ordinary income would encourage high earners to convert some of their pay into lower-taxed forms of compensation, and higher taxes increase tax avoidance and the shifting of resources away from productive investment and towards tax planning and avoidance.

3. Administrative complexity: Wealth taxes require reliable valuation and enforcement; taxing capital income fairly across forms is complex and costly. Studies of OECD countries found wealth taxes raised little money and drove away wealthy people, with only four OECD nations retaining a wealth tax as of 2017.

4. Timing: Arguments against raising the tax rates on high-income taxpayers start with the bad timing of raising taxes in the midst of a weak economy.

What Public Opinion Shows

Polling consistently shows majority support for higher taxes on the very wealthy, with bipartisan elements:

Support is not unlimited - when it comes to taxing wealth, support never goes above 37% for certain wealth tax designs in one YouGov survey, and a California poll found just 45% of likely voters approve of taxing California's wealthiest residents.

Trade-offs and Design Considerations

Policy analysis suggests the outcome depends less on whether to tax more and more on how:

In short, whether the wealthy should pay more depends on priorities: If the goal is reducing inequality, funding public goods, and improving fairness, targeted, well-enforced progressive taxation is often seen as justified and effective. If the priority is maximizing short-term investment incentives, minimizing avoidance and capital mobility, or simplifying the code, opponents argue keeping current rates or broadening the base without raising marginal rates is preferable.