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Who wants to soak a millionaire?

  • A group of wealthy individuals in the West has appealed for higher taxes on the rich to help governments fight the covid pandemic. It’s an alluring idea, but is it feasible?

As many as 80 millionaires, mostly from the US and UK, and also from Germany, Denmark and Canada, have urged their governments to tax them and other wealthy individuals more heavily to raise funds for the battle against the covid-19 pandemic. In an open letter, these rich folk have said that raising levies on “people like us" would help administrations finance public hospitals, schools and security.

The quest for social equity has led almost all governments around the world to adopt progressive taxation, by which the well-off pay a greater portion of their earnings. This is based on the logic of diminishing marginal utility: the rich need every extra dollar a lot less than the poor do. But only a few have especially heavy burdens on millionaires. This is based on the argument that a tax rate too high—over 50%, particularly—would simply take away the incentive to earn large sums, which dampens the spirit of enterprise. Of course, there are variations on this theme, but both the political left and right in most democracies seem to have settled on these principles.

But is there a case for a corona tax on the rich? This is an unprecedented crisis and is proving very costly. Also, it’s well accepted that the State has a big role in keeping people safe. Despite all this, however, it’s not clear whether a steep escalation of tax rates can be justified. Perhaps a temporary surcharge on big earners could work. But ultimately, fiscal lessons learnt over the decades will probably come to bear on state finances. There are many millionaires who believe their own charity spending is far more effective than what inefficient governments do with their money. And they value their freedom to decide how it is deployed.

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