Feb 12, 2026, 2:08 PM ETInterview

How much tax should the rich pay? | The Economist

Contrary to the narrative of shrinking government and neoliberal rollback, data indicates a steady increase in government redistribution across the rich world since the late 20th century.
In the United States, the bottom fifth of earners received 32% of their market income from government transfers in 1979, a figure that rose to 72% in the most recent Congressional Budget Office (CBO) data.
The top 1% of U.S. taxpayers pay a higher average federal income tax rate today than in 1979, though this is not the peak rate for the period.
U.S. pre-tax inequality (measured by the Gini index) has trended steadily upward, while post-tax inequality has remained relatively flat, indicating successful offsetting by tax and transfer policies.
In the broader rich world, inequality after taxes and transfers has generally declined since 1990, contrasting with the rise in inequality observed during the 1980s.
The trend is particularly acute in Europe, specifically Britain, where income tax progressivity has increased significantly over the last decade.
Post-tax and transfer inequality in the UK is currently lower than it was in 1986, despite prevailing narratives of ever-rising inequality.
This pattern of increased progressive taxation and redistribution has been characterized by the authors as a "Robin Hood economy."

The top 1% of U.S. taxpayers pay 27% of total federal taxes while earning only 20% of total income, suggesting significant progressivity rather than widespread tax evasion.
The threshold for the top 1% in the U.S. is approximately $600,000 in household income.
This demographic comprises high-earning professionals such as lawyers, bankers, and doctors, rather than the "super rich" engaged in complex tax avoidance schemes.
Higher tax contributions from the top 1% result from both their increasing share of total income and increased progressivity within tax codes.

A subscriber poll regarding the tax burden of the top 1% yielded the following breakdown:
- 69% of respondents believe the top 1% pay too little.
- 18% believe the current level is about right.
- 13% believe the top 1% pay too much.
Henry questioned the validity of setting specific ideal tax rates, noting that higher taxes on high earners generally poll well across the electorate.
Henry expressed disquiet that the public opinion gap would likely remain unchanged even if top tax rates were increased by 10 percentage points.
The author suggests that public opinion does not serve as a limiting principle on how much can be extracted from the wealthy.

Henry's Perspective on Fairness:
- Henry argues that fairness involves more than equality; it must include rewarding effort, hard work, and talent, alongside the concept of property rights.
- He posits a zero-sum dynamic where there is no obvious "limiting principle" to taxation, as lower inequality rates will invariably invite calls for further taxation.
- Henry warns against the unhealthiness of a society where everyone wants others to pay for public services rather than accepting shared responsibility.
Mike's Perspective on Economic Design:
- Mike argues that redistribution as a primary goal simply because income disparity exists is not a sound social objective.
- He advocates for a system focused on establishing a minimum standard of living rather than continually taxing high earners.
- Mike identifies wealth and investment as the "worst" things to tax, as they are necessary for economic growth and productivity.
- He suggests an ideal tax structure targets negative externalities (e.g., rents, monopoly activities) and consumption rather than income or investment.
- Mike believes taxing high incomes focuses on the "wrong bucket," effectively taxing the source of capital formation rather than bad activities.