Here’s my attempt at using the Costco Connection format to look at this question from both sides.
What the experts say: Economists tell us that wealthier folks have lower utility for each marginal dollar than less wealthy folks, because they have more than met their basic needs.
Or, as most people believe, the wealthy can afford to pay more than the less wealthy.
The wealthy benefit more from government, so should pay more to support it.
Tax rates can help us remedy unfair income distributions.
The wealthy already pay more than the less wealthy.
It’s presumptuous of us to feel we have the right to demand more from the wealthy than we are willing to give ourselves.
Even if it’s true that the wealthy have less utility for each additional dollar than the less wealthy, that’s not the right comparison. Wealthy people have higher utility for each additional dollar than government bureaucrats have with other people’s money.
Diminishing marginal utility is not a good argument for taking stuff from people. If I stole all the stuff in your attic, would you accept my argument that what I did was right because you weren’t using it?
Everyone benefits from government and it’s fair to expect everyone to pay something for it. In any situation where a minority pays for the majority of something that everyone benefits from (or thinks they benefit from), the tendency is for the majority to demand more and more, because it costs them nothing to do so.
Tax rates do not remedy envy. Higher tax rates on the wealthy can contribute to perceived income inequality, as wealthy folks respond to the incentives of their after-tax pay, not their before-tax income, while inequality is often based on gross income. In other words, if you raise taxes on the wealthy, they’ll seek to make even more income to make up for those higher taxes.
Higher tax rates also encourage the wealthy to make adjustments in their lives to avoid paying those taxes. Wealthy folks moved from England and France after those countries passed higher tax rates on the wealthy, for example.
I think we spend too much time talking about tax rates and not nearly enough time talking about government spending.
I think everyone, no matter how rich or poor, should pay something.
I don’t begrudge the wealthy of their wealth, especially the wealth of those who have earned it fair and square. That means they’ve added value to society, something we fail to consider as we salivate over ways to take it from them.
Even with 20/20 hindsight, I’m appalled at how we fail to see that earned wealth often carried with it gut-wrenching risks, previous failures and an extraordinary amount of persistence against the odds. We act as if it was a given.
I don’t accept that wealthy people have less marginal utility for an additional dollar than the less wealthy. If that were true, I would expect to see more evidence of that in the financial behavior of less wealth people.