Are higher tax rates for the rich a good idea?

Maybe not – Becker argues:

raising tax rates by only a few percentage points on a sizable tax rate base- as in President Obama’s proposal- will tend to have large costs in efficiency even when the elasticity of response to the tax increase is relatively small.

While Posner is less certain that efficiency will decline, he notes:

The real significance of the proposed tax increases is political. Income inequality is growing in the United States and there  is increased resentment at what seem the outlandish incomes of the rich and the increased frequency of crime and sharp practices by businessmen (whether that frequency actually has increased is unknown). A tax increase limited to high earners might assuage this resentment somewhat.


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