by Michael Schuyler
July 29, 2014
Thomas Piketty’s bestselling Capital in the Twenty-First Century calls for much higher taxes on upper-income individuals. He recommends a global wealth tax and, for the United States, top income tax rates of 80 percent on income above $5 or $10 million to combat inequality and 50 or 60 percent on income above about $200,000 to combat inequality and grow the government. What would this look like if it were implemented? This model estimates that after the economy adjusts, total output would be 3.5 percent lower, wage rates would drop 1.6 percent, the capital stock would be 7.4 percent less, and there would be 2.1 million fewer jobs. Changes in capital gains and dividends taxes would do even more damage – an 18.1 percent drop in output, a 42.3 percent reduction in capital stock, 14.6 percent lower wages, and 4.9 million lost jobs. All income groups would suffer from the economic fallout.