“Nothing is certain except death and taxes,” quipped Benjamin Franklin in a 1789 letter to French encyclopedist Jean-Baptiste Le Roy. Whether they attribute the line to Franklin or not, many Americans will undoubtedly have it in mind as they file their tax returns this week. For the wealthiest Americans, however, only the first part of Franklin’s statement applies; the superrich have not yet found a way to cheat death, but they have excelled at cheating the IRS.
To be sure, much of the tax avoidance practiced by those at the top is perfectly legal. As economists Emmanuel Saez and Gabriel Zucman explain, the last forty years have witnessed dramatic declines in top marginal tax rates. Moreover, the very rich often avoid paying higher taxes by minimizing their taxable income, preferring to keep their vast holdings tied up in shares and illiquid assets not subject to the income tax. Because the very richest can shield their tax liability in this way, Saez and Zucman argue, a tax on wealth is needed to curb great fortunes and ameliorate their distorting effects on democracy and the economy.
Seeing taxes on the wealthy as not just a way to raise revenue but as a method of equalizing political and economic power marks an essential shift, according to journalist Bryce Covert. Whereas much of the prevailing political discourse portrays taxes primarily in terms of a funding mechanism for government programs, “a wealth tax is also valuable in and of itself because it reduces inequality and could reform our oligarchical system,” Covert writes. “Just like smoking or emitting carbon emissions, the accumulation of massive fortunes harms the rest of us and should be discouraged,” she contends.
Similarly, for political scientist Felicia Wong, the virtue of taxing the very rich lies in its beneficial effects on the economy as a whole, not just in its ability to redistribute wealth and fund worthy programs. While these functions are certainly important, advocates for a more progressive tax system “should go further, pointing out that taxes themselves can be a form of regulation, in that they help structure the economy in the first place.” Well-enforced progressive taxation can promote productive investment and redound to the benefit of all, she concludes.
Other essays on this week’s reading list explore the economics, politics, and philosophy of taxation from a variety of angles. Tax scholar Alex Raskolnikov makes the case for taxing the affluent—the top 90 to 99 percent—as well as the ultra-wealthy; economist Marshall Steinbaum discusses tax havens and globalization; political scientist Timothy Weaver disputes the efficacy of providing tax breaks to private investors; philosopher Liam Murphy analyzes the meaning of justice in taxation; and more. |