What should the top rate of income tax be? Should it be 70%, as has been informally suggested by the young star of the US Democratic Party, Congresswoman Alexandria Ocasio-Cortez? That instinctively feels too high to me. But, as an economist with sporadic hopes of making logical arguments based on evidence, I admit that “instinctively feels too high” is a weak response. What about 50%, the official policy of the UK’s opposition Labour Party at the last general election? Or zero, the optimal top rate that emerged from a thought experiment posed by the late James Mirrlees, a Nobel laureate in economics? An alternative is to tax wealth instead of income, as US Democratic senator Elizabeth Warren has proposed. But — at least in principle — there is not much difference between a small annual tax on total wealth and a large tax on the nominal return generated by that wealth. To make the case for a top rate of tax above 70%, it helps to believe four things. The first is that taxable income...

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