Mobilizing the Lower Upper Class

I got a chance to meet Matt Miller the other day and talk to him a bit about his neat new book The Tyranny of Dead Ideas. One thing we talked about was the possibility of mobilizing class resentment among what you might call the lower upper class.

As I’ve been emphasizing, if you earn over $250,000 a year, you’re earning more than the vast majority of Americans. And you’re also earning about five times what the average household takes home. At the same time, if you earn $250,000 then anyone who makes over $1.25 million is earning five times what you make. And in a very large country with an extremely large degree of “right tail” inequality, you can be in this weird position of being quite rich while at the same time there are lots of people who are orders of magnitude richer than you are. People who you might well run into at your college reunion, and who might send their kids to the same summer camp as your kids. It’s potentially a potent ground for fostering class resentment and progressive tax policy.

In other words, while I have no sympathy with the idea that making the lower upper class return to Clinton-era tax rates is too hard on them, I think you could have some sympathy with the idea that your person earning $250,00 shouldn’t pay the same marginal rate as much as someone making $1.25 million or $6.25 million. Why not add additional marginal brackets? One could start at double the current top rate baseline, then another at double that, then another, then another, then another. You couldn’t raise a ton of additional revenue that way, since you’re not talking about a very large quantity of people, and you would have some supply-side impact on earnings (I don’t think anyone’s going to “Go Galt” but I’m happy to believe that an NBA player’s proclivity to forgo some potential earnings in order to play on a championship contender and cement his legacy would have some relationship to the top marginal tax rate) but you could get some revenue that could be spent on useful programs. And soaking the very rich would have some direct benefits for the not-quite-as-rich in terms of reducing the price of luxury goods and letting them do better in pure status competition.

I don’t think there’s any huge social problem you can solve through this route, but it would make things better and, I think, be a political winner. It’s too bad nothing along these lines made it into the 2010 budget.


In other news, some day I should write again about the idea of making tax brackets infinitesimal so that there is no “top bracket.” This would have been unworkable 100 years ago, but with computers there’s no reason we can’t do it.