Should the rich pay more?

President Obama in his speech to Congress the other day has raised once again the issue of whether tax rates on the very rich should be raised.  His argument, based on a fairness argument (and specifically on the notion of vertical equity), is that people should pay taxes based on their ability to do so, the rich are more able to do so than current income tax rates reflect, and therefore those rates should be increased.  Greg Mankiw from Harvard in this article disagrees in two ways.  First, he disputes the claim that tax rates of the very rich as as low as Obama says.  Instead, he argues from a fairness perspective, when one includes the taxes paid by corporations, the very rich are in fact already paying a significant amount.  Second, he argues against raising tax rates on the very wealthy because it will result in them reducing their work effort, thus resulting in a smaller economy.  Thus, he argues it would be wrong from an efficiency and therefore Utilitarian perspective.

I understand the argument that corporate taxes should be included in the calculations.  However, that assumes that what matters from a fairness perspective is the end result - how much money individuals get to keep.  That's the standard approach in economics, but my sense is for many people, it is the process of taxation that is at least as important.  For those people, Obama's argument will carry more weight.  Secondly, I also understand the efficiency argument that Mankiw raises.  However, that argument depend crucially on increased marginal tax rates having significant effects on output, and I'm not sure that's true.  Among highly paid CEOs, for example, there is an argument that they seek high salaries simply as a matter of social status (check out the 2010 LSE Lionel Robbins Lectures by Lord Turner), and that they would be willing to put out the same effort if CEO salaries were lower, so long as their relative salary remained the same.  (Those with some background in economics will recognize this as evidence of economic rents.)  As a result, I remain skeptical of the efficiency argument but, as always, open to persuasion.