alt Hacker NewsLet's do a thought experiment and take it to the extreme: why not tax at the maximum?
We have already tried that in human history, it's called communism. No one is allowed to take private profit, everyone contributes to the best of their own ability, and everyone consumes according to their needs. It should be utopia because there is no wealth gap and wealth is maximally redistributed. Which is exactly what taxation is designed to do, only to the most extreme.
And I think everyone will agree with me that communism is a miserable failure. The rich may not leave physically but mentally they are checkout -- not willing to work as hard or take as much risk. So the answer is yes, if you tax them, most certainly they will leave physically for haven with lower tax, all things being equalled. Or leave mentally.
But not all things are equalled, so you can still tax them at a somewhat higher rate provided that you can provide other incentives. But still, too much tax will make it more likely for those who are able to to leave. This is almost an axiom.
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Okay so there is a globally optimal point/region of taxation that is not "maximum taxation". Where is it?
Reminder when left to it's ways Capitalism reverts to company towns paying in scrip to make sure workers can't move away, so manipulating financial payout is very much within the Capitalist model and fair game in their ideology (only stopped by Government interference).
Capitalism's final form is a dystopian hellscape of rivers that can be lit on fire, unbreathable air, leaded gasoline, asbestos ceilings, company towns paying scrip, strike break private militias, opioid epidemics (wild this isn't a one time thing for Capitalism, but then the model for Capitalism seems to endpoint with getting people addicted to the product).
Everyone can agree pure Capitalism is a miserable failure that creates an unsafe environment and product landscape based on addictiveness. Time after time when left to their own choice, Capitalists chose making a worse world. The Capitalism model requires tight constraints from society to prevent Capitalists from creating an horrific, awful world like they have every time in the past when left unregulated.
The question is why do we make sure Capitalism can't destroy our rivers anymore, or pay workers in scrip (creating their end goal ideal of an inescapable labor system) but when they economically destroy the civil fabric with unequal wealth distribution we somehow refuse to step in? Capitalists long term will NEVER chose societal benefit, yet somehow we keep hoping they will and under regulating them. I remember when extremely liberal friends started getting their vested options and them excitedly talking about the whole loan model to not have to pay taxes, even though they 'supported' high taxes and knew the societal benefit.
Communism has never been tried at a large scale. Soviet Union didn't have it. China doesn't have it.
Just because someone has "communism" on paper doesn't mean the society actually functions according to the communist idea.
Social democracy has been tried in many places and it has produced things such as the Nordic Model and the Nordic states that have been very successful.
After the 2nd World War USA was very close to socialism. High wealth taxes, workers unions etc. As a result your average worker had a lot of purchasing power which of course fuels economic strength.
In fact many if the world's best performing companies are a kind of exercise in socialism since the RSU programs share ownership and results of the company to the workers (even if it's a small share)