When taxes on the rich were much higher than today, in the decades just after World War II, the economy boomed. Since the 1980s, high-end taxes have plummeted, and the U.S. economy has struggled: Economic growth, incomes for most people and other measures of well-being (like life expectancy) have stagnated since the 1980s. One exception was the 1990s — after Bill Clinton had raised income taxes on the rich as well as the corporate tax.
Teasing out cause and effect on these issues is difficult. But there is no good evidence that low taxes on the wealthy help the larger economy.
2. They’re doomed to fail
One part of this argument also has little evidence to support it, while another is more debatable.
The weaker part claims that the wealthy will figure out a way to avoid all the effects of a tax increase. That, too, is historically inaccurate. When the federal government has raised tax rates on the rich, tax payments by the rich have risen.
“Many people have the view that nothing can be done,” Gabriel Zucman, an economist at the University of California, Berkeley, has told me. “That’s wrong. Look at history.”
Here’s another way to think about it: If the very rich could actually avoid the effects of tax increases, they probably wouldn’t spend so much money and effort trying to defeat proposed tax increases.
The more serious argument is that creating a new wealth tax would be more logistically difficult than raising existing taxes, like the inheritance tax, corporate tax or income tax. (Senator Kyrsten Sinema of Arizona and nearly all Republicans evidently oppose many of those other increases, making them impossible to pass and causing some Democrats to turn their attention to wealth taxes.)
A new wealth tax would require federal officials to do something new: estimate the value of assets each year. They would also have to decide which were subject to taxation. Many experts consider these challenges to be surmountable, but other countries have sometimes struggled with the details.
