Jack Salmon, Research Fellow at the Mercatus Center and author of the Substack The Unseen and The Unsaid (and recent podcast guest!) has a great piece out this week that tears down the myth popular among tax hike advocates these days.

The writeup was inspired by a post on X from Tom Steyer, billionaire and California gubernatorial candidate, making a familiar argument: top tax rates were sky-high in the postwar decades, and all that revenue built the middle class.

This claim surfaces reliably in every tax debate, deployed to suggest that …

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While most people were trying to file their taxes last month, Senator Elizabeth Warren was busy trying to raise them.  Her reintroduced Ultra-Millionaire Tax Act of 2026 would impose a 2-percent annual levy on individual net worth above $50 million, a 3-percent rate on billionaires, and generate what its proponents claim will be over $6 trillion. That estimate is the economist equivalent of drawing blood from a stone – it doesn’t exist and it shouldn’t be taken seriously.

Warren’s latest proposal also includes a 40 percent “exit tax” on the net worth of any American worth more than $50 million …

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In economics, the “Greater Fool” theory holds that investors buy overpriced assets expecting others will pay more for them later. So a stock or real estate bubble will continue until the proverbial “last fool” jumps in, at which point there’s nobody left to keep the bubble going and it bursts.

We need an analogous theory for tax policy these days. States like California, New York, and Washington continue to raise taxes and otherwise create an environment that is hostile to investment and entrepreneurship. The result has been an unprecedented flight of taxpayers and capital out of those states:

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