Soaking the Rich? It Could Backfire for Progressives
The benefits are uncertain and might interfere with goals for social programs.
In the end, everyone will be unhappy.
Photographer: W. G. Phillips/Hulton Archive/Gewtty ImagesWhat is the purpose of taxing the rich? Most economists would answer that the goal is to get revenue for government to spend on things that benefit society — roads, schools, health care, housing and aid for the poor. The argument is grounded in the theory of the diminishing utility of wealth. If you take $10 million from a billionaire and split it among 1,000 poor people, the billionaire will barely notice the loss, but the poor people will see a big improvement in their lives by getting $10,000 each.
That’s the standard argument for redistribution. It definitely seems to represent the policy choices of social democracies like Denmark and Sweden, which have very high taxes and levels of social spending. But recently, some on the political left — including some prominent economists — have begun to make a very different argument. It’s not about raising money, they say, but because discouraging people from amassing great fortunes in the first place makes society a fairer, more equitable place.