The high level of income inequality in the United States is at the forefront of policy attention. This paper focuses on one potential policy response: an increase in the top personal income tax rate. We conduct a simulation analysis using the Tax Policy Center (TPC) microsimulation model to determine how much of a reduction in income inequality would be achieved from increasing the top individual tax rate to as much as 50 percent.

Legendary multi-billionaire businessman Eli Broad wrote a heartfelt New York Times opinion column this month urging a broad wealth tax to improve income inequality. Worthy goal. The column's subhead says, “Wealthy people like me should commit to reducing the ravages of economic inequality.” Most wealth lists say I’m only worth about half what Broad is, but I have an idea for him that is twice as good, faster and more direct than any wealth tax.

There’s a story we like to tell about American capitalism. Ours is a country that prizes merit, rewards risk and stands apart in its commitment to the collective success of open markets and the free flow of capital. We are a nation of strivers who can pull ourselves up by our bootstraps with the right combination of grit and determination.

That’s the tale we love to tell and hear. But take it from a person who has found himself on the fortunate side of that narrative: This story is incomplete. For most people, our system isn’t working.