Dave Chappelle explains why high marginal tax rates are great

Here's the description from the Upshot:

Dave Chappelle, the comedian who walked away from a wildly successful TV show named for him a decade ago, made his first talk show appearance in ages Tuesday night. He probably wasn’t intending to make an argument about maximizing the efficiency of the tax system in his appearance on the “Late Show With David Letterman,” but that’s what he ended up doing.

Mr. Chappelle discussed the reported $50 million contract he walked away from when he abruptly ended “The Chappelle Show.” Does the loss of all that money haunt him?

“So I look at it like this,” Mr. Chappelle said. “I’m at a restaurant with my wife. It’s a nice restaurant. We’re eating dinner. I look across the room and I say: ‘You see this guy, over here across the room? He has $100 million. And we’re eating the same entree. So, O.K., fine, I don’t have the $50 million or whatever it was, but say I have $10 million in the bank.’ The difference in lifestyle is minuscule.”

His point is about the diminishing marginal utility of rising wealth. If you are flat broke and somebody gives you $1 million, that money significantly increases your quality of life. Going from $1 million to $10 million makes you better off, though probably not 10 times better off. And similarly, going from $10 million to $50 million in net worth creates far less improvement in your quality of life than those early steps of going from broke to $1 million or $1 million to $10 million.

The video of Chappele explaining this is here. Indeed, one of the greatest things about higher marginal tax rates is the marginal utility of wealth. In other words, raising taxes on rich people isn't a zero sum game, because transferring one dollar from a millionaire to a poor person helps the latter much more than it hurts the former.

As Matt Yglesias puts it, "the difference, in welfare terms, between a Sub-Zero refrigerator and an Ikea refrigerator is much smaller than the difference in welfare terms between having health insurance and not having health insurance."