Optimal tax rates for the rich are a perennial source of controversy. This column argues that high marginal tax rates on the top 1% of earners can make society as a whole better off. Not knowing whether they would ever make it into the top 1%, but understanding it is very unlikely, households especially at younger ages would happily accept a life that is somewhat better most of the time and significantly worse in the rare event they rise to the top 1%.
Nezih Guner, Martin Lopez-Daneri, Gustavo Ventura, 05 October 2014
Recent calls for closing fiscal deficits have been combined with proposals to shift the tax burden and increase marginal tax rates on higher earners. This column argues that revenue-maximising tax rates for high earners in the US would be substantially higher than current rates. However, increasing tax rates for high earners would not raise much additional revenue.
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