The Punitive Economics of Thomas Piketty

Thomas Piketty is a French economist who believes, among other things, that all income above 1 million euros should be taxed at 80%. As discussed in this post at Reason, he appears to acknowledge that such a high marginal rate will not increase government revenues much. His goal, rather, is simply to hold down the incomes of top earners.

Why do his views matter in the U.S.? Because his analysis of income distribution forms a basis of the Obama administration's economic policies, as pointed out in a March 12 opinion piece in the Wall Street Journal:

"A New Era of Responsibility: Renewing America's Promise. The President's Budget and Fiscal Preview" (Government Printing Office, 141 pages, $26; free on the Web) . . . is the U.S. budget for laymen, and it's a must read.

Turn immediately to page 11. There sits a chart called Figure 9. This is the Rosetta Stone to the presidential mind of Barack Obama. Memorize Figure 9, and you will never be confused. Not happy, perhaps, but not confused.

The [chart] on page 11 is attributed to "Piketty and Saez." . . .

Thomas Piketty and Emmanuel Saez, French economists, are rock stars of the intellectual left. Their specialty is "earnings inequality" and "wealth concentration."

As described in Mr. Obama's budget, these two economists have shown that by the end of 2004, the top 1% of taxpayers "took home" more than 22% of total national income. This trend, Fig. 9 notes, began during the Reagan presidency, skyrocketed through the Clinton years, dipped after George Bush beat Al Gore, then marched upward. Widening its own definition of money-grubbers, the budget says the top 10% of households "held" 70% of total wealth.

Turn to page five of Mr. Obama's federal budget, and one may read these commentaries on the top 1% datum:

"While middle-class families have been playing by the rules, living up to their responsibilities as neighbors and citizens, those at the commanding heights of our economy have not."

"Prudent investments in education, clean energy, health care and infrastructure were sacrificed for huge tax cuts for the wealthy and well-connected."

"There's nothing wrong with making money, but there is something wrong when we allow the playing field to be tilted so far in the favor of so few. . . . It's a legacy of irresponsibility, and it is our duty to change it."

Mr. Obama made clear in the campaign his intention to raise taxes on this income class by letting the Bush tax cuts expire. What is becoming clearer as his presidency unfolds is that something deeper is underway here than merely using higher taxes to fund his policy goals in health, education and energy.

The "top 1%" isn't just going to pay for these policies. Many of them would assent to that. The rancorous language used to describe these taxpayers makes it clear that as a matter of public policy they will be made to "pay for" the fact of their wealth -- no matter how many of them worked honestly and honorably to produce it. No Democratic president in 60 years has been this explicit.