We do have a few programs that work on the insurance principle, like Social Security and Medicare, and it’s not a coincidence that those are our most resilient programs. On multiple occasions it has even been the American left, which in theory supports a more robust social system, that has undermined creating the European-style tax base needed to fund it. The United States has always rejected this broad-based approach to taxation, insisting on progressive taxation instead.
And economists have endorsed it, pointing out that the wealthy have benefited disproportionately from the economic growth of the last several decades, that taxes on the wealthy prevent unproductive dynasties from forming, and that the things those tax revenues are spent on, from child care to clean energy, can benefit the economy.
What’s more, taxing the wealthy is popular, with a majority of Americans telling pollsters that they think the wealthy don’t pay their fair share. By taking care of those who lose out in the free-market melee, the winners ensure the losers won’t want to destroy the system. Why is it so hard to tax the rich? After all, the idea behind progressive taxation is simple, even beautiful: Let the engine of capitalism roar and then have the winners compensate the losers. The latest version is a surtax on millionaires, but it could easily meet the same fate as its predecessors by the time the deal is done. Ron Wyden’s (D-Ore.) Billionaires Income Tax made it as far as a plan, but seems to have died the day it was born. First there was President Joe Biden’s suggestion to increase capital gains taxes for heirs, which disappeared over the summer. In the last few weeks, the Democrats have veered from one tax-the-rich plan to another. Monica Prasad is a professor of sociology and faculty fellow at the Institute for Policy Research at Northwestern University.
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