Ben Walsh — Economists Say We Should Tax The Rich At 90 Percent

All Americans, including the rich, would be better off if top tax rates went back to Eisenhower-era levels when the top federal income tax rate was 91 percent, according to a new working paper by Fabian Kindermann from the University of Bonn and Dirk Krueger from the University of Pennsylvania.

The top tax rate that makes all citizens, including the highest 1 percent of earners, the best off is “somewhere between 85 and 90 percent,” Krueger told The Huffington Post.

The Huffington Post
Economists Say We Should Tax The Rich At 90 Percent

Ben Walsh
h/t Clonal

This what taxing away economic rent means. Economics is about circular flow. Extraction and saving (wealth accumulation) leak from circular flow. Then either the economy contracts, or government accommodates saving (wealth accumulation) with its fiscal balance.

The problem in economics is that neoclassically based econ thinks that money is a veil and market distribution naturally encourages circular flow (Say's law, Walras's general equilibrium). But as Marx observed, capitalism is not about production of goods and services for consumption but rather about wealth accumulation. 

The purpose of a capitalistic economy is really for the "meritocracy" to accumulate wealth as their "just deserts." However, differentiating between productive contribution in terms of real investment and work and economic rent shows that to be a false assumption. Add to that an institutional structure that incentivizes rent-seeking, and you have neoliberalism.

The fix is to disincentivize rent-seeking by taxing away rent and putting suitable institutional controls in place that limit economic rent, e.g., anti-trust legislation to prevent monopoly, monopsony, and oligopoly, limiting artificial barriers to market entry, etc.

Michael Hudson has been on economic rent and the needed to tax it away as a disincentive for rent-seeking and an incentive to productive economic activity as long as anyone living although it goes back to the classical economists.

Ostensibly as a reaction to Karl Marx and Henry George, there was a concerted effort by neoclassical economists to banish consideration of economic rent through marginalism as the basis of meritocracy and just deserts, and a natural tendency toward general equilibrium based on assumptions of market perfection, rationality, and utility maximization. Keynes and his followers showed that to be flawed.