Taxing the Rich Won’t Fix Fiscal Problems—Policy Expert Warns

By Veronique de Rugy
Friday, 02 January 2026 03:21 PM EST

There’s a satisfying emotional pull to watching a wealthy individual advocate for higher taxes on those like themselves. It feels civic-minded, even noble.

A recent commentary by former Utah senator, Massachusetts governor, and Republican presidential nominee Mitt Romney fits squarely into this pattern. Facing a looming fiscal cliff, Romney concludes that entitlement reform is unavoidable and that raising taxes on affluent Americans must be part of the solution.

Yes, the status quo is unsustainable, and pretending otherwise is reckless. Yet taxing the rich cannot meaningfully address our underlying fiscal challenges. Worse, pursuing this illusion risks worsening those problems while blocking opportunities for future generations.

Consider basic arithmetic: High-income households already shoulder a disproportionate share of federal income-tax revenue. The top 1% contribute roughly 40% of tax revenues; the top 10% pay well over two-thirds. When taxes and wealth transfers are factored in, the system has grown progressively over time.

This reality creates a critical problem: There simply isn’t enough taxable income at the top to fund a government built around large-scale, universal middle-class benefits.

Romney proposes raising revenue through measures like removing payroll tax caps, taxing assets more heavily upon death, ending real estate “like-kind exchanges,” limiting state and local tax deductions, and closing carried-interest preferences. Studies consistently show these policies yield only a fraction of projected deficit reductions—even under optimistic scenarios.

A deeper issue lies in the assumption that those taxed will pay full costs without altering their economic behavior. Higher marginal tax rates discourage investment, career choices, and human capital accumulation. They push employers toward retirement rather than hiring anew. Critically, this affects not just today’s wealthy but tomorrow’s entrepreneurs, engineers, doctors, and business builders.

Romney’s moral posturing is especially troubling. It’s easy to say “tax me more” once wealth has been built—yet imposing such a system earlier would have reduced the likelihood of many becoming wealthy in the first place. In short, taxing the rich today makes it harder for young people to build wealth tomorrow.

Economic mobility depends on the possibility of outsized success. When returns on effort, risk-taking, and skill acquisition diminish, fewer individuals invest in those paths. Evidence shows more progressive tax systems reduce incentives to accumulate human capital and expand businesses long-term—resulting in slower growth, lower productivity, and fewer opportunities.

Further, new tax revenue rarely reduces deficits as promised. History suggests spending rises faster than taxes when revenue increases. The real driver of today’s fiscal imbalance remains untouched: entitlement programs with automatic cost growth and benefits increasingly flowing to those already financially secure.

Romney is correct that retirement benefits should be means-tested—but the idea that we cannot adjust these for retirees is nonsense. Many beneficiaries don’t rely on Social Security for income and have received more than they paid in.

If wealthy Americans genuinely believe they should contribute more, they can voluntarily support the Treasury through direct payments—a far better solution than policies locking in a tax environment that stifles future wealth creation.

The temptation to tax the rich is understandable. But such measures will not stabilize government finances or restore confidence in the system. Worse, they risk transforming a society that once rewarded ambition into one that quietly penalizes it.