Here is a letter I wrote on March 12, 2009, to Daniel Henninger, editorialist for the Wall Street Journal, responding to his column by pointing to the fundamental futility and absurdity of the concept of ‘progressive’ tax rates.
If Messrs. Piketty and Saez believe that the rich have a moral responsibility to share some portion of their incomes and wealth with the not-rich, does that mean the rich have a moral responsibility to earn those incomes and wealth, so that there is something available to be shared? What if the rich were to decide that they already have enough wealth to sustain them through the rest of their lives, and so they declined to produce any more – would that be an immoral decision? Would Piketty and Saez prefer an economy in which people ate only what they killed or grew or obtained through barter, or are the non-rich entitled to a higher standard of living? If the rich have a moral responsibility to work, just how hard is it that they are supposed to work? Must they produce enough so that everyone can have a flat-panel TV and an IPhone, or will older technology suffice? Who decides how hard they should work – the same people who decide how much they get to keep?
Perhaps Piketty and Saez live in a cocoon and believe that tax-analysis should be static and should ignore the fact that changes in the rates of taxation tend to cause changes in the behavior of taxpayers. Alan Reynolds, in a piece published earlier than the Journal edition to which you refer, totally debunked that notion and also showed (as did Prof. Hauser) that tax collections are always pretty much a constant percentage of GDP whether tax rates are high or low – so you might as well keep them lower rather than higher, in order to stimulate growth in GDP and thereby increase actual tax collections.
[Posted @ mecmoss.com 10 Feb 2012]