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Opinion
Noah Smith

France Tried Soaking the Rich. It Didn’t Go Well.

A wealth tax and sky-high rates on top incomes didn’t yield much revenue. 

I’m outta here.

I’m outta here.

Photographer: Harold Cunningham/Getty Images Europe

In recent years, several prominent economists have brought attention to the problem of growing inequality. These scholars include Thomas Piketty, author of the best-selling book “Capital in the Twenty-First Century,” and Emmanuel Saez and Gabriel Zucman, who in a new book chronicle the rise in American wealth inequality. All three embrace the same solution:  much higher taxes. Piketty has declared that billionaires should be taxed out of existence, and he called for a global wealth tax, while Saez and Zucman helped Democratic presidential candidate Elizabeth Warren design her proposal for a U.S. wealth tax. Piketty and Saez have also suggested taxing top incomes at a rate of more than 80%.

Other economists have struggled to evaluate dramatic proposals like this. Studies on the effects of taxation when rates are moderate might not be a good guide to what happens when rates are very high. Economic theories tend to make a host of simplifying assumptions that might break down under a very high-tax regime. Historical experience is of some help, because the U.S. had very high top income taxes in the 1950s, but economic conditions could be very different now.