Don’t be embarrassed to ‘soak the rich’

The left is beginning to make noise about asking the rich to contribute more revenue to the well-being of our republic.

Rep. Alexandria OcasioCortez has suggested, for example, that our wealthiest citizens be taxed at a rate as high as 70 percent on income above $10 million. Sen. Elizabeth Warren has proposed a tax not only on income, but on wealth. Warren's plan would impose a 2 percent annual tax on all assets worth $50 million or more and 1 percent on assets over $1 billion.

Predictably, the wealthy quickly objected, and not just Republicans. Potential Democratic presidential candidate Michael Bloomberg called Warren's plan "probably unconstitutional," adding that "we shouldn't be embarrassed by our system."

Possible independent candidate Howard Schultz (another billionaire) told NPR that Warren's idea is "ridiculous."

But it's not just the wealthy who are shocked by the idea of taking more money away from people just because they happen to have a lot. Many ordinary Americans are reluctant to impose higher taxes on the rich. But it's a reluctance that we should get over.

For one thing, it makes economic sense. For economics, I turn to economists. Recently, New York Times columnist Paul Krugman, himself a Nobel Prize-winning economist, noted the work of Peter Diamond, another Nobel laureate in economics, who contends that the optimal tax rate on the rich, the rate that raises the most revenue, is 73 percent. Other distinguished economists argue that the best rate is closer to 80 percent.

In other words, if we put aside the feelings of the rich — that is, their sense of their right to all that money — the marginal tax rate that provides the most revenue for our society is more than double the current highest rate, 37 percent. And Krugman notes the demonstrable correlation in the past between periods of high tax rates for the rich and strong economic growth.

In short, the "radical" proposals from Ocasio-Cortez and Warren are consistent with respectable economic theory and research. But how do we get over our psychological reluctance to take money away from rich people? Here's one way to think about it:

When the Pilgrims first beheld our country's favored shores, they saw almost unbounded natural resources: fertile land, timber, water and, later, coal, oil and natural gas. Much of our nation's current wealth depends on the rich bounty that greeted the newcomers.

It's a fine aspirational American ideal to hope that all citizens have some claim to the benefits of these resources, but that's not exactly what happened. First, access to the nation's riches required the displacement of people who had already lived here for millennia.

And from the beginning the two biggest sources of labor — women and blacks, who did most of the hard work — were uncompensated. For the most part, white men reaped the benefits of the American enterprise.

Things have changed, of course. But they haven't really changed all that much, have they? Wealth is still concentrated to an inordinate degree in the hands of white men, and so is wealth's symbiotic counterpart, political power.

In fact, in recent decades, wealth and power have worked together successfully to increase the gap between those who have the most money and those who have the least. And the middle class hasn't been doing very well, either.

Of course, the wealthy would prefer that we believe that their riches are the result of hard work and innate merit. Sometimes they are.

But a great deal of wealth is entrenched, self-perpetuating and protected by the political power that money can buy.

Why should the wealthy pay more? Because they benefit the most from our common national enterprise, especially our shared national resources and the labor and the willingness of the lesswealthy to defend the American system. Without these, their wealth would be impossible.

The wealthy may not have as much as they want, but they have much more than they need. It shouldn't embarrass us to expect them to pay more. A more equitable distribution of wealth would be good for everyone, probably even the wealthy.