Emmanuel Saez and Gabriel Zucman have promised us a book on “Tax Justice.” That’s great. Perhaps it will help us understand the op-ed1 they recently published in the New York Times.

It is not strange to see these two economists arguing for confiscatory marginal tax rates. Given their scholarly and popular writings on taxes and inequality, the surprise would be if they had written something different. What’s strange is what they don’t say. They make claims about all manner of things. Let’s consider those claims.

Consider, for example, the nostalgia they seem to feel for the period between 1951 and 1963, when marginal tax rates exceeded 90 percent. In an important recent paper,2 Pikkety, Saez and Zucman dig into the data and show that average tax rates on the top 1% of income earners haven’t changed much since the 1950s. Historically, at least, imposing high marginal rates on the rich hasn’t meant that the rich pay more in taxes. Why, then, consider raising rates? Well, they tell us, “[T]hat few people faced the 90 percent top tax rates was not a bug; it was the feature that caused sky-high incomes to largely disappear.”

Huh? Where did those “sky-high incomes” disappear to? Were they just hidden in plain sight behind a screen of complex tax law? (And, if so, did those high marginal tax rates really do much to fight income inequality?) Or did they genuinely vanish because those sky-high earners simply chose not to earn? And how did all that vanishing cash affect the lives of everyone else? We can be pretty sure that a fair amount of it ended up in the pockets of lawyers and lobbyists, but did anyone else benefit from the money that moved where those lawyers and lobbyists wanted it to move? The answer matters, and Saez and Zucman—both competent empiricists who have privileged access to IRS data—should help us figure it out.

Further along in their op-ed, they tell us (and to do it justice, I have to quote the whole paragraph):

    An extreme concentration of wealth means an extreme concentration of economic and political power. Although many policies can help address it, progressive income taxation is the fairest and most potent of them all, because it restrains all exorbitant incomes equally, whether they derive from exploiting monopoly power, new financial products, sheer luck or anything else.

Let’s break all this down.

Start with the “anything else” category of exorbitant incomes that they so casually mention. Who exactly are these anything-else-ers? Is it Amazon’s Jeff Bezos? (Amazon is big, but it doesn’t dominate retail and certainly didn’t benefit from the most common source of monopoly power—regulations that protect certain firms.) Is it George Lucas, said to be the world’s richest celebrity? (While he probably had his share of “sheer luck,” he combined that with hard work and his own genius.) Is it the late John Bogle, who started Vanguard Financial? (Sure, his money came from promoting “new financial products,” but is that really what what Saez and Zucman don’t like? Vanguard made life better for millions of small investors.)

And while we’re trying to parse this paragraph, could Saez and Zucman explain why they think that fairness requires the government to restrain “all exorbitant incomes equally”?

“Is there no difference between the Ponzi-scheme runner Bernie Madoff and Berkshire Hathaway investor Warren Buffet?”

Maybe their idea of fairness requires simply that similarly situated individuals be treated equally. That’s consistent with the common-sense morality that almost everyone accepts. But if that’s all they mean by fairness, then they need to tell us whether they think that all people with “exorbitant incomes” are similarly situated? Is there no difference between the Ponzi-scheme runner Bernie Madoff and Berkshire Hathaway investor Warren Buffet?

On the other hand, maybe they see the fairest distribution of income as one that comes closest to giving everyone the same material goods—a notion of fairness that philosophers3 describe as strict egalitarianism. That is a respectable point of view; many contemporary Catholic theologians advocate some version of egalitarianism. But it’s also a very radical view. There are other respectable notions of distributional justice that have very different implications for economic policy. For example, utilitarian notions of distributive justice may require a non-egalitarian distribution of income, at least insofar as the utilitarian acknowledges that people are not all the same. “Desert-based” principles suggest that people are entitled to material goods as a consequence of their actions. Saez and Zucman may reject these or other principles of distributive justice, but if they really are strict egalitarians, they should tell us.

What about economic growth, inequality and taxes? There are really two kinds of questions here. The first is a question of the proper tradeoff between inequality and growth. The second are the empirical questions of how confiscatory taxes affect growth and inequality. Saez and Zucman ignore the first question and give an inadequate answer to the second.

This is a good time to bring up Tyler Cowen, who argues in his new book, Stubborn Attachments,4 that economic growth trumps economic inequality. According to Cowen, redistribution today might affect the lives of a relatively small number of people, while growth will improve the lives of vast numbers of people in generations to come. It’s a powerful claim. Those who advocate redistributive taxes should say loudly and clearly whether they believe the claim to be true. Saez and Zucman don’t bother.

Instead, they hint that there is no tradeoff to be made, that confiscatory taxes won’t affect growth. That’s Big If True. But the “facts” they muster to support the case are just—for the lack of a better word—weird. They point out that the United States and Japan have seen periods of sustained economic growth in the face of high marginal tax rates, and that in Putin’s Russia, growth is negative despite very low marginal tax rates.

But what does that prove? The relationship between the government and the economy isn’t defined by a single number, such as the statutory marginal tax rate. The 1950s were different from today in all sorts of ways. And Japan in the 1950s and 1960s had high growth rates, in part because it was recovering from a devastating war that destroyed many of its cities. Countries playing catch up often grow fast. Also, does anyone think that the statutory marginal rate of 13% is a measure of the real burden that the Russian government imposes on high-income earners?

Naturally, an op-ed is not the place for detailed regression results, but that doesn’t make it ok to offer stories as real evidence.

We can only hope that in their forthcoming book on tax justice, Saez and Zucman will say the things they didn’t say in their op-ed. We can hope that they’ll help us with two empirical questions. First, what was really happening in the era of high rates? Second, why don’t they think we should worry about how taxes will affect growth? Furthermore, we can hope that they will explain their underlying philosophical position—what do they mean by “justice,” and why do they think we should share their views?

But as important as anything else, they need to acknowledge that they’re really arguing for an enormous increase in the power of the state. Though progressives talk incessantly about the distribution of income and wealth, they seem to be more concerned with the distribution of power. Any plan for income redistribution—certainly any plan of the magnitude imagined by Saez and Zucman—necessarily requires a powerful government. Income redistribution doesn’t simply take purchasing power from people with lots of money and give that power to people with less power. It establishes the government as a grand agent, taking power from some citizens and granting power to others.

Now, you might think that’s just and proper. You might think that the kind of democratic government we actually have does a fine job of empowering the powerless—that government has an almost Godlike capacity to know the just distribution of power and to strip power from those who have too much and give it to those who have too little. But if that’s what you think, you have some explaining to do.

It isn’t enough to argue for some idealized version of democracy. You have to deal with the democracy we really have. The last 50 years has seen epic growth in the power of democratic governments in this country. That democracy gave us hellish wars in Vietnam, Iraq, and Afghanistan. It gave us sugar tariffs that protect millionaires and ethanol subsidies that turned the vast sections of Midwest farmland into a frightening monoculture of corn, with all the resulting problems of agriculture runoff and declining diversity of important insect populations. It gave us public schools that fail to educate the children who most need education.

Whatever the flaws in their article, Saez and Zucman understand that they’re engaged in a great debate about power. They start their article by saying that imposing higher tax rates on high-income people is, in part, “about safeguarding democracy against oligarchy.” They end by writing, “Democracy or plutocracy: That is, fundamentally, what top tax rates are about.”

This is an important debate, and Saez and Zucman will almost certainly have a prominent place on the stage. But let’s have a real debate. Let’s not pretend that our only choices are between a large, powerful state on one side and an oppressive oligarchic plutocracy on the other. Democracy is consistent with limited government. Ceding more power to the state—even a democratic state—does not necessarily produce more justice.


[1] Emmanuel Saez and Gabriel Zucman, “Alexandria Ocasio-Cortez’s Tax Hike Idea Is Not About Soaking the Rich,” New York Times, January 22, 2019.

[2] Thomas Piketty, Emmanuel Saez, and Gabriel Zucman, “Distributional National Accounts: Methods and Estimates for the United States,” September 25, 2017. PDF file.

[3] “Distributive Justice,” in the Stanford Encyclopedia of Philosophy, revised September 26, 2017.

[4] Tyler Cowen, Stubborn Attachments, Stripe Press, 2018.

* Michael L. Davis is a senior lecturer in business economics at the O’Neil Center for Global Markets and Freedom at Southern Methodist University’s Cox School of Business.

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