Bruce Ackerman and Anne Alstott: Why (and how) to tax the super-rich

Bruce Ackerman and Anne Alstott are professors of law at Yale and the authors of "The Stakeholder Society."

President Obama is right to insist on the "Buffett rule": Millionaires should not be paying income tax at a rate lower than their secretaries'. But correcting this inequity is only a small step toward fairness.

The more serious inequality problem facing the United States involves overall wealth, not just income. While the top 1% of Americans earned 21% of the nation's income, they owned a staggering 35% of the wealth in 2006-07, the most recent year for which statistics are available. We should be taxing that wealth directly, and not merely focusing on million-dollar incomes....

There is more at stake than fairness. Our proposal would address a deeper issue. There comes a point at which extreme wealth concentration threatens the very existence of democracy, and we are reaching that point.

This is one of the tragic lessons of Latin American history, where democracy has repeatedly bumped up against tight economic oligarchies that feel threatened by majority rule. Though reliable statistics on wealth equality aren't available, we do know that income inequality in the U.S. today far exceeds that in Europe, and it is getting into the Latin American range. Because wealth is generally more concentrated than income, we are clearly in the danger zone.

Remarkably enough, the CIA has investigated the matter, and its website contains some sobering estimates. It reports that income is already more concentrated in the U.S. than in Venezuela, though we still have a way to go to reach the dizzying heights of Brazil and Chile....