June 8, 2010

Taxes and the Rich

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Felix Salmon notes Jeff Sachs’s suggestion that tax rates on the rich should rise substantially, and demurs:

I don’t think this is possible, politically, in either the US or the UK. In the US, the middle classes are implacably opposed to tax hikes on people making more money than they themselves will ever make. I’m not entirely clear on the reasons for this, but I suspect it has something to do with the American Dream of becoming incredibly successful: no one wants to reach that gilded land only to find it full of taxes.

Someone — a journalist or an academic, I’m not sure which — should consider this an assignment desk piece: Why are Americans so unsympathetic to higher taxes on zillionaires? Does it really have something to do with an unfounded optimism about themselves someday becoming rich? I’ve heard this explanation a thousand times, but there’s really never any evidence for it except for one thing: an old poll (which I can’t locate just at the moment) showing that 19% of Americans think that someday they’ll be millionaires. The problem is that (a) it’s just one poll and (b) it’s still only 19%. If that were really the reason Americans were opposed to taxing the rich, we’d still have about 80% of the country in favor.

So what is the reason? The “American Dream” answer is one possibility. Generic anti-tax fervor is a possibility. A principled sense of justice (i.e., no one should have to pay more than half their income in taxes, or some such) is a possibility. Widespread delusion about how much the rich currently pay in taxes is a possibility. There are lots of possibilities. But which of these are actually the prime motivators? Someone should try to find out.

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