Introduction

Should the rich pay more tax? Many in the Democratic party think so, judging by the Democratic-sponsored Congressional proposal of 1992 that featured an increase in the top bracket rate from 31% to 36%, with a 10% surtax on millionaires taking the proposed top rate to 39.6%. So, apparently, do many in the British Labour Party, whose 1992 electoral platform contained an increase in the top marginal income-tax rate from 40% to 50%. As it happened, the U.S. tax bill containing the tax increase was vetoed by President Bush, largely because of the rate increases; the Labour Party was defeated.

Despite the recent lack of success in the United States and the United Kingdom of proposals to tax the rich more heavily, it is unlikely to go away as an issue. A tax increase on those with annual income exceeding $200,000, plus a “millionaire's surtax,” is part of the Democratic Party's platform for the 1992 presidential race. Fueling the drive to increase tax progressivity is a sense that the 1980s saw a shift in tax burden away from the high-income class toward the middle-income class, at the same time that the distribution of pre-tax income was becoming substantially more unequal.

Logically prior to the question of whether the rich should be taxed more is the question of whether the rich can be taxed more. If levying higher rates on the rich yields no increase in revenue then only the envious would favor such taxation, for it benefits no one in society.