Yesterday at the colloquium, Alex Raskolnikov presented Should Only the Richest Pay More?, a paper which I believe has been receiving a bit of well-deserved attention on the conference etc. circuit.
While reading it, I thought of Voltaire's famous (although probably apocryphal) statement: "I detest what you say, but I will defend to the death your right to say it."
Here, by contrast, I was thinking: "I generally agree with what you say, but a part of me wishes that you wouldn't say it!"
The paper starts by suggesting that the upper income echelons in our society might reasonably be divided into 3 groups: the really rich (the top 0.1%), the pretty rich (the rest of the top 1%), and the affluent (the rest of the top 10%). As the paper shows,
The "really rich" earn at least $2 million a year. Often they are top executives, superstar lawyers or doctors, or highly successful business owners and real estate or finance professionals.
The "pretty rich" earn between $500,000 and $2 million a year. Often they are successful doctors, lawyers, engineers, software developers, or mid-level executives, along with a few academics in select fields.
The affluent earn between $150,000 and $500,000 per year (although here as well as above one might want to consider the relevance of regional adjustments). While this group is highly heterogeneous, recent college or professional school graduates may enter it promptly upon becoming Big Law associates, practicing surgeons, or software engineers at top tech companies.
The paper makes three main arguments:
(a) Much recent tax policy talk in the biz has overly distinguished between the top 0.1 percent and others in the top 10 percent. This has occurred at the level of both diagnosis (discussing whose economic blast-off from the lower echelons has adversely affected society as a whole) and tax policy prescription (whose taxes should be increased in a progressive tax reform that aims both to raise revenue and to mitigate rising high-end inequality).
(b) Progressive tax reform proposals, which often these days are limited to the top 0.1%, should at least consider raising taxes on the entire top 10%. Even if concerns about political feasibility weigh against the broader reach, it should at least be more on the table in academic discussions.
(c) The recent literature's deafening silence on such a broader reach (this is my phrase, but I think it expresses the paper's view) merits interrogation.
To illustrate the shift, consider progressive tax reform plans from 20-ish years ago, such as Michael Graetz's plan to replace the income tax on up to the first (say) $100,000 of income with a VAT, or Bruce Ackerman's and Anne Alstott's plan to use a wealth tax to fund cash grants that people would start receiving at age 18. Both had a broader reach at the top than recent plans to, say, impose wealth taxes, or else to tax accrued but unrealized capital gains, but with these proposals applying only at the very top of the income spectrum. The paper argues that, while it's one thing for Elizabeth Warren or the Biden Administration to aim proposed tax increases purely at the really rich and perhaps the pretty rich, it's another thing for academic commentators, who need not be limited in all their writing by political feasibility concerns, to avoid all consideration or even discussion of extending progressive tax increases to the affluent.
As the paper notes, one can see this shift happening in real time in, say, Piketty et al's work over the last 20 years. And in popular culture, one can see it in the 2011 Zuccotti Park Occupy Wall Street protests, which distinguished between the top 1 percent and everyone else. But to the contrary, the paper argues, the affluent resemble the top 0.1 percent in the extent to which they both (i) have gained economically in recent decades, relative to everyone else, and (ii) have contributed, through their rise, to the broader social ills that many (myself included) attribute to extreme high-end inequality.
Here I will offer 2 types of comments: critiquing the paper's main arguments, and seeking to explain the attitudinal changes that it notes.
1) Critiquing the paper's main arguments - I agree with the paper's conclusion that there is enough continuity, as we march down the economic scale from the really rich through the pretty rich to the affluent, to suggest that tax increases for all ought to be on the table from a progressive standpoint (which I share with those whom the paper critiques). But I think that in some cases the current draft overstates the similarities between these groups. In other words, I think the differences are greater than the paper allows, albeit not great enough to support the sharp distinctions between the groups that the paper criticizes. Just to pick a couple of main areas (there are more in the paper than I will seek to review here):
a) Political and cultural influence - The paper argues that the affluent may have as great (and democratically disproportionate) an influence on US political outcomes as the really rich, who have been widely blamed (including by me) for exerting plutocratic power.
I agree that the affluent are very powerful in certain narrow realms of particular interest to them. Consider the politics around §529 plans (and short-lived proposals to reduce their tax benefits), or around tax subsidies for retirement savings that do far more to benefit their retirement saving than that of people who really need help in this regard. Or concerning SALT deductions, even though (to date) the coastal affluent have not been able to reverse their losses from the 2017 act.
But I believe that the super-rich have far broader, more pervasive, and more agenda-setting influence. Consider the long-plotted, well-funded plan now recently crowned with success, to capture the Supreme Court and much of the federal judiciary for Federalist Society ideologues with a consciously anti-democratic agenda. Or consider the decades-long anti-tax and anti-regulatory campaigns that have been funded through right-wing think tanks as well as through campaign contributions. Or consider big-donor dark money, whose rise since the Supreme Court more fully unleashed it has been pervasive (even if deployable to a degree by Democrats as well as Republicans).
On the cultural front and with regard to public discourse, note how the likes of the Murdochs and Fox News, Zuckerberg and Facebook, and perhaps soon Musk and Twitter can shape things for all of us. It's true, as the paper notes, that these institutions are staffed by members of the affluent class. But does this really democratize them, even just from the 0.1 percent to the full 10 percent, given under whose direction the well-paid flunkies are laboring?
b) Keeping up with the Joneses - Bob Frank and others (including me) have discussed the importance of relative position to people's wellbeing and behavior. Thus, for example, when people in one's reference group start having fancier weddings or living in bigger houses, one may feel a need to match them just to avoid losing ground in either status competition or one's own feelings of personal satisfaction. The paper notes that one's reference group often prioritizes those who are equal to or just above oneself economically, as opposed to those all the way at the top.
While there is certainly some truth to this, there are prominent social science theories (such as those of Veblen as well as Bob Frank) suggesting that radiation down from the top has a pervasive influence on the entire process, even if it in effect functions one step as a time. This happens to fit my own intuitions about how these social processes operate, although I recognize that there are unresolved empirical questions here.
c) Comparative rate of progress - As the paper notes, in multiple studies of how wealth and income distribution have changed in recent decades, the relative gains of the top 10 percent appear to rival those of top 0.1 percent, while everyone below has relatively stagnated. (The pretty rich have also gained somewhat less in comparative terms than the really rich or the affluent.) The gains of the affluent reflect increased "skill bias" in the labor market, rewarding the well-educated with good college and professional degrees, while the gains of the really rich reflect rising globalization and economic concentration, resulting "tournaments" with a few big winners, the rise of rent-seeking, IP's growing role, etcetera. So, if one is concerned about relative change, both groups should be kept in mind.
But on the other hand relative change in position is not as such what matters the most. While it raises transition concerns, arguably today's statics (and what we expect in the near future) have greater normative weight than what things used to look like. For example, if today the positions of the affluent and/or the really rich have negative effects on the rest of society, how much does it matter whether these effects are new as opposed to having been around for decades?
There's lots more in the article that I won't touch on here. But, in general, I agree that, even if the paper might overstate a bit the extent to which the current positions of the really rich and the merely affluent present exactly the same issues, I agree that the issues posed are similar enough to support the paper's conclusion that progressive tax policy thinking should look more broadly, and that there is a strong case for raising taxes on the affluent as well as on the really rich. And yes, even if political feasibility concerns support the narrower scope, the broader reach should at least be on the table (more than it now is) in academic discourse.
2) Why the changes in attitude? - If the reach of academic discussions of progressive tax changes has narrowed in the last two decades, and I agree that it has, what might explain the shift? In the mode of explanation rather than justification, I think the key change is that things have gotten so much darker and more dystopian in our country since the era of the Graetz and Ackerman-Alstott proposals.
a) Political feasibility - It's not just that one's proposals may have little chance of being enacted unless they hold harmless the bottom 99 percent of the distribution. The bigger problem is that Republicans and the right have weaponized and debased tax policy talk, making responsible budget talk about needed long-term tax levels close to impossible.
There's a "Nixon goes to China" thing going on here. Only a responsible person on the right could safely bring broader-ranging tax increases back into public discourse. And unfortunately that appears to be a null set or oxymoron, in sharp contrast to 1980s US politics.
Plus, those on the right who would attack any broader-ranging tax increases are not merely undermining long-term revenue adequacy and distributive justice - many of the same people are also actually trying to overthrow American democracy. This creates an environment in which even independent-minded academics could reasonably think: If I don't align with the Democrats' (politically constrained) tax policy discourse, I might actually be aiding the cause of galloping American fascism.
I'm not saying here that this feeling is correct - that is, that one shouldn't conduct a broader progressive tax policy discourse due to the grotesquely and indeed transparently malignant evil that is triumphantly on the march in America today - but rather that it may influence (even if unduly) the questions one poses to oneself and the issues that one chooses to write about.
b) Who's to blame? - Twenty years ago, the main concern among progressive tax policy analysts was simply that personal welfare and economic opportunity were too unequally distributed. Hence, even if one was merely affluent, it was easy to see that others were worse-off and had fewer opportunities than oneself and one's children, and that one ought to support doing something about this.
Today, by contrast, there is a widespread sense (which I share) that things have gone darkly wrong in our society, and that this may have something to do with the rise of high-end inequality. So people are looking for scapegoats or villains.
The paper captures this current spirit, asking such questions as "Who ruined the American Dream?" and "Who sapped the American spirit?" These are not questions that the likes of Graetz or Ackerman-Alstott were asking in the more halcyon era of the late nineties and early aughts.
Once one is viewing high-end inequality in this way, I think it becomes psychologically more uncomfortable to include oneself among the targets of progressive tax policy than it was 20 years ago. It's one thing to agree that one is doing pretty well and others less so, and quite another to include oneself in the roster of those who one deems responsible for the awful current state of things.
Again, I offer this suggestion by way of explanation, not justification. It certainly makes me want to focus more on the top 0.1 percent than the top 10 percent, even if I ought to be focusing on both.