Here’s an interesting bit of coronavirus math: America’s billionaires today could give $3,000 apiece to every person in the country and still be left with bigger fortunes than they had before the pandemic started. That’s not a solution to America’s current economic crisis but rather an illustration of how wide the gulf between the super-rich and everyone else has grown. As Congress prepares to send the nation deeper into debt to stabilize the economy, it’s time to seriously debate the merits of a wealth tax.
The economic devastation of the pandemic has fallen largely on wage earners, driving the nation’s poverty rate to almost 12% as of November, with some 8 million Americans newly defined as impoverished. At the same time, the pandemic has actually benefited the super-rich, whose fortunes are tied to the booming stock market. A recent USA Today study found that America’s 614 billionaires have seen their combined net worth climb by $931 billion since March. Just that new money in their portfolios is more than the entire stimulus package Congress was negotiating last week.
THE GULF between the have-nots and the have-everythings has grown consistently since the early 1980s, driven by globalization, the declining power of labor unions and supply-side taxation policies. Chief executive compensation has risen an average of more than 1,000% in that time, while average worker compensation has gone up only about 12%.
A wealth tax would be levied on the richest Americans annually based on their accumulated wealth. In that sense, it’s less like an income tax than a property tax, except it’s levied on their entire net worth. The plan proposed during the Democratic presidential primary campaign by Sen. Elizabeth Warren, for example, would tax a family’s wealth above $50 million at 2% a year, with another 1% added for wealth over $1 billion.
We’re not saying Warren’s formula is the last word, but the Treasury would see an estimated $4 trillion over 10 years if something like it were enacted. That could ultimately offset the $3 trillion-plus deficit the federal government is currently running, due largely to pandemic stimulus and rescue spending.
Such a tax would also incentivize the ultra-rich to do something with their fortunes, even if just to spend more, because any money they sit on would be taxed year after year.
Working to get rich is the American way, but it doesn’t happen in a vacuum or without significant social costs. It’s no coincidence that the U.S. is home to four of the world’s five “centibillionaires” (people worth more than $100 billion). America provides the freedom, security and dynamism to make such accumulation possible. But when a tiny few spiral to obscene heights of wealth even as so much of the country is spiraling downward, it’s time for some adjustments.
