How to Tax the Rich

As a purely practical matter, raising taxes for the richest Americans is harder than it might seem. Several options that have received considerable attention and some support either would not raise much revenue or are unadministrable (or close to it). Much of the problem comes down to the challenge of taxing capital. In particular, increasing the tax rate on capital gains income is problematic because it would generate little revenue, despite claims based on official tax expenditure tables that doing so would generate tens of billions of dollars per year.1 Other options suffer from the same problem, including the Obama administration’s proposed new minimum taxes.2 Some, like the nowrenowned Thomas Piketty, have suggested more radical measures like annual wealth taxation or mark-to-market income tax accounting;3 however, these options seem troubled, if nothing else, by the considerable challenge of administration.