Nuance is nearly always appealing to academics. For a long time, that was true of my approach to economic issues, particularly including income distribution. When presented with simplistic populist solutions to inequality like “Make the rich pay!”, I was inclined to responses along the lines of “It’s more complicated than that”.
A big problem with “Make the rich pay!” is that with the kind of income distribution that prevailed in the mid-to-late 20th century, any change to income tax that would raise significant revenue would have to apply to the top quintile (20 per cent) of the income distribution. People in the top quintile of the income distribution mostly derive their income from (typically professional or para-professional) employment, don’t think of themselves as rich, and aren’t, in general, seen this way by others. So, the slogan didn’t match the implied policy.
But with the rise of the patrimonial society that’s largely ceased to be the case. The top 1 per cent of the US population now get more than 20 per cent of all pre-tax income, considerably more than the total revenue of the Federal government. Within that group, the top 0.1 per cent have done better than everyone else, and the top 0.01 per cent even better.
So, taxing the 1 per cent more makes sense. I responded a little while ago to a piece trying to argue increasing the top marginal tax rate would make no difference to inequality. And while I was drafting this post, the NY Times came out with an article that reached broadly the same conclusion as mine.
There’s nothing inherently ludicrous in the suggestion that the very rich should pay most or all of the costs of sustaining a system that benefits them so greatly[^1]. And, as in the 1920s, the very rich are different from everyone else. Their wealth is derived primarily from capital, or from control over capital (as business owners or from the financial sector). And, while most of the current cohort of ultra-wealthy did not inherit large fortunes, that’s an inevitable consequence of the fact that there weren’t many large fortunes to inherit until recently. As Piketty demonstrates, a society dominated by large accumulations of wealth will inevitably one in which inheritance, rather than effort, education or talent, determines life outcomes.