There is No Economic Reason Not to Raise the Top Rate

http://economistsview.typepad.com/economistsview/2012/03/there-is-no-economic-reason-not-to-raise-the-top-rate.html

Bruce Bartlett says Allan Meltzer made a pretty good case for raising taxes on the wealthy::

Would a Higher Top Tax Rate Raise Revenues?, by Bruce Bartlett, Commentry, NY Times: On Friday, Prof. Allan Meltzer of Carnegie Mellon University, a well-known conservative economist, offered a commentary in The Wall Street Journal arguing against policies to equalize the distribution of income.

His key piece of evidence is ... from a study by the Swedish economists Jesper Roine and Daniel Waldenstrom, that shows the share of income accruing to the top 1 percent of earners in seven Western democracies. They all follow the same trend line, Professor Meltzer says, and it proves that “domestic policy can’t be the principal reason for the current spread between high earners and others.” ...

Leaving aside the fact that the ultrarich have gained far more in the United States than any other country in his sample and that there is no upward trend at all in the Netherlands, he seems to have missed an important implication of his own conclusion.

If the rich are going to continue to get richer in low-tax countries and high-tax countries alike, then it must mean that high tax rates have far less of a disincentive effect on the rich than conservatives like Professor Meltzer continually proclaim. ...

If, as Professor Meltzer has shown, the rich get richer regardless of the tax rates, there is no economic reason not to raise the top rate. Perhaps unwittingly, his research confirms that of other economists who say that we could get substantial additional revenues even if the top rate doubled.

tags: inequality
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