Taxing The Rich Won't Always Work

by Patrick Appel

Free Exchange reacts to a surtax on the rich being proposed to fund health care:

For me, the biggest concern is that Congress seems to have followed the path of least resistence here and it may do so again in the future. Recall that America has a fairly significant structural deficit, which will only grow as the population ages. American also has fairly significant need for large-scale investment in things like infrastructure and education. Revenues are going to have to rise to avoid a budget crisis somewhere down the road. And that means that taxes will have to rise.

It would be extremely unwise to try and stick all of the additional tax burden on the rich.

Unnecessary, toothere are many opportunities out there to tax negative externalities, and the use of a broadly shared tax burden to fund fairly progressive social safety nets in Europe seems to work well. It's a lot easier to raise taxes on 1.2% of the population than on the majority, but that's a game which begins to have diminishing returns very quickly. There are ways to raise revenues without placing a very large drag on economic activity, and Congress needs to figure out how to find the political mojo to make it happen.