All of this could be possible. Many countries, the historical record shows, have successfully implemented stiff tax rates, with the United States one of them. During World War II, the U.S. federal tax rate on income in the top tax bracket hit an astonishing 94 percent. Top tax rates in nations like the UK, Sweden, and Denmark surpassed 90 percent into the 1970s. Overall, the top U.S. tax rate averaged 81 percent for nearly half a century, from 1932 through 1980.
What about the claim that the costs of taxing the rich outweigh any benefits? The evidence shows the exact opposite: The benefits from high taxes on the rich — and low levels of inequality — run far greater than the costs, a different order of magnitude altogether.
High taxes do, to be sure, come with some costs. But these seldom amount to much. Take, for instance, the argument that rich people will respond to high taxes by working less. Precious little evidence supports this contention. Does anyone really believe that, say, Lebron James would quit playing basketball if he faced a higher tax rate? Many high-earners do not work simply for the money. They find motivation in status, power, and prestige — and even sometimes in a love of what they do.
The most serious argument against high taxes on the rich may well be that they reduce private investment. But seriously taxing the rich doesn’t necessarily reduce investment. In many cases, high tax rates simply re-arrange investment. If the state collects taxes and then spends that money in productive ways, the economy will grow. Indeed, the state-of-the-art evidence shows that high inequality, all things considered, actually tends to reduce an economy’s overall growth rate.
So much for the costs of significantly taxing the richest among us. What about the benefits? Five stand out.
Our environment. The richest 20 individuals emit 8,000-times more carbon than our Earth’s poorest billion people combined. Redistributing a portion of top wealth to invest in things like public transit would directly reduce emissions and help build a desperately needed low-carbon infrastructure.
Our democracy. Inequality erodes democracy. In the United States, as the political scientists Martin Gilens and Benjamin Page have noted, the majority “does not rule – at least not in the causal sense of actually determining policy outcomes.” Democracy has disintegrated into oligarchy.
Opportunity for all. Inequality makes a mockery of the equal opportunity we claim to value. The poorest residents of Chicago today face a life expectancy fully thirty years shorter than the richest. High redistributive taxes could reverse this most brutal of disparities.
Reduced xenophobia and racism. Right-wing populism typically grows hand-in-hand with economic insecurity. We can reduce that insecurity by taxing the rich to fund free public services, a stronger safety net, and perhaps even a guaranteed basic income.
Reduced social friction. Reducing inequality, the evidence also shows, builds community health and cohesion. Reducing inequality encourages greater levels of trust and tolerance, better mental health, and less crime. That said, I did find one area where my initial suspicions didn’t hold up. The jury remains out whether inequality clearly shortens life expectancy.
One final issue: meritocracy. Do the rich genuinely deserve their immense fortunes?
The standard answer from the left: We have nothing close to a level playing field. Inheritances, well-endowed private schools, and all sorts of other advantages give the rich a huge and unfair head start. The poor inherit all kinds of disadvantages, from poverty to sexism and racism.
True enough, but the most basic problem with meritocracy goes even deeper. High levels of economic performance never come from solo efforts. All production, at root, rests on a fundamentally social and collaborative process. We’re always standing on the shoulders of the people who have come before us.
All market production relies on what I call the understructure, the background human and environmental labor and care that make it possible for production to happen in the first place.
Microsoft’s Bill Gates benefited from a network of parents and teachers who cared for and socialized him. He benefited from the safe, clean, and peaceful communities that he lived in, from the generations of scientists and computer engineers who created the vast intellectual edifice that he built upon, as well as the countless ancillary workers and caregivers who supported those scientists and engineers.
Gates also personally benefited from a legal infrastructure making possible copyright protection as well as “shareholder primacy” laws that let him appropriate the bulk of the value his workers created while simultaneously depriving those same workers of any say in firm governance. Gates did not create the vast and productive understructure of the American economy and so doesn’t deserve the rewards that flow from it.
Overall, I calculate that approximately 99 percent of the income of the top 1 percent cannot actually be attributed to the individual effort or talent of rich individuals. The true source of 99 percent of their wealth: other people’s labor, a reality that makes their wealth overwhelmingly undeserved.
“Meritocracy” has within it a still deeper problem. All our talents and efforts reflect forces beyond our control. We don’t choose to have the bodies that we have. We don’t choose our own personality or intelligence or disabilities. Yet such things massively impact our capacities. Meritocracy essentially declares that those who, by no fault of their own, have bodies and minds less strong and smart than others rightly deserve worse lives. This truly noxious assumption leads us to reward some and punish others for their random luck.
A good society should jettison talk of “deservingness.” The socialist historian Howard Zinn had it right: “Give people what they need: food, medicine, clean air, pure water, trees and grass, pleasant homes to live in, some hours of work, more hours of leisure. Don’t ask who deserves it. Every human being deserves it.”
We do not need the awesomely rich. In fact, we’d be far better off without them.
Tom Malleson is an associate professor at King’s University College at Canada’s Western University. He is the author of Against Inequality: The Practical and Ethical Case for Abolishing the Superrich (Oxford).
less tax evasion in America’s corporate boardrooms.