That is the topic of my recent Bloomberg column. Excerpt:
I am reminded of these points by the recent death of the economist James Mirrlees, a Nobel laureate. His most famous contribution to the field was a model suggesting that the marginal rate of tax on the most skilled workers should be zero.
To illustrate the rationale for this view, imagine that Jerry Seinfeld is no longer doing comedy. His non-existent output, correspondingly, results in no government revenue. What if the government taxed his additional comedy work at a rate of zero? Theoretically, such a policy would encourage Seinfeld to produce more comedy shows without harming government revenue. Both Seinfeld and his audience would benefit.
Mirrlees did not think this was a practical guide to policy, if only because the tax authorities will never be able to tell at exactly what level a zero marginal tax rate will have the desired effect of inducing talented people to continue working. Instead, the model is a guide to thinking about the relevant trade-offs behind tax policy — namely, that foregone output from the talented is a major consideration.
Now, do I wish the world was arranged in such a way that zero tax rates could be handed out, at the proper margins, to these highly talented individuals? Absolutely. I don’t think you would find the same aspirational enthusiasm from the progressive left on this issue.
Do read the whole thing.