The KrugMan Speaks

Paul Krugman tells about Taxing The Rich:

First, over the past three decades we’ve seen a soaring share of income going to the very top of the income distribution (right scale) even as tax rates on high incomes have fallen sharply, with the recent Obama increases clawing back only a fraction of the previous cuts:

Second, there is now a lot of hard empirical work on the incentive effects of high top tax rates. None of it shows the kind of huge negative effects that figure so prominently in right-wing rhetoric. In particular, none of it suggests that we are anywhere close to the point where raising taxes on the rich would reduce revenue as opposed to increasing it.

Here're the bullet points from the article at Economic Policy Institute:

The top U.S. income tax rate is currently well below best estimates of the optimal rate for revenue maximization.

Recent research implies a revenue-maximizing top effective federal income tax rate of roughly 68.7 percent. This is nearly twice the top 35 percent effective marginal ordinary income tax rate that prevailed at the end of 2012, and 27.5 percentage points higher than the 41.2 percent rate in 2013.2 This would mean a top statutory income tax rate of 66.1 percent, 26.5 percentage points above the prevailing 39.6 percent top statutory rate.

Tax reform that broadens the tax base and minimizes tax avoidance opportunities actuallyincreases the revenue-maximizing top marginal tax rate.

This means that base-broadening tax reform and higher marginal rates should be seen as complements, not substitutes. Analyses of top tax rate changes since World War II show that higher rates have no statistically significant impact on factors driving economic growth—private saving, investment levels, labor participation rates, and labor productivity—nor on overall economic growth rates.

Both short-run demand-side and long-run supply-side growth effects stemming from top tax rate changes are extremely modest. Thus, related “dynamic” revenue “leakages” stemming from reduced economic activity following top rate increases are small as well. Indeed, the net revenue feedback of the 2001–2004 tax cuts was recently estimated at recouping just 1 percent of their scored cost.

Historically, decreases in top marginal tax rates have widened inequality of both pre- and post-tax income. This has been interpreted by some economists as marginal rate reductions providing a higher payoff to rent-seeking (i.e., using influence to “bargain” a higher share of income at the expense of other workers).

Today’s economic context of a depressed U.S. economy, political pressure to prematurely reduce near-term budget deficits, and ever-widening income inequality actually strengthens the case for raising top marginal tax rates. There remains substantial scope for further raising top rates toward the revenue-maximizing levels estimated by the best economic research.

I'm all for letting your Freak Fly.  You feel a deep driving need to get rich? Go for it. It's mostly a lotta fun to watch, and you should get to hang onto the bulk of it.  But let's make sure the things that need to be taken care of are getting taken care of - 'cuz those are the things that everybody's responsible for; the things you get the biggest benefits from; and the things that make it possible for you to continue making your zillions.  But mostly, let's make sure the disparity and inequalities are kept to reasonable levels - 'cuz that's what keeps the wait staff from takin' a giant shit in your punch bowl.