Why top rates of income tax should be much higher | Social Europe


Another bit of basic economics that neoliberals hardly ever mention is the diminishing marginal utility of consumption.

This implies quite the opposite of low tax rates at the top. It is socially much more beneficial to tax those to whom one dollar is not worth the effort of picking it off the sidewalk and transfer it to those who are poorer.

A well known paper by Diamond and Saez found that, after allowing for disincentive and avoidance effects, the optimal top rate of income tax in the US should be 73 per cent.

There are two reasons why even 73 per cent might be an underestimate.

Source: Why top rates of income tax should be much higher • Social Europe

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