An annual wealth tax, levied on those who make more than $50 million a year, could solve a number of festering problems, from raising revenue for pandemic relief to slowing a democracy-disrupting concentration of power. It’s an idea whose time has come.
Sen. Elizabeth Warren, D-Mass., Reps. Pramila Jayapal, D-Wash., and Brendan Boyle, D-Pa., recently introduced legislation to levy a 2% annual tax on wealth starting at $50 million, rising to 3% on fortunes of more than $1 billion.
Polls show that the idea of a national wealth tax has overwhelming popular support, including among Republicans and independents.
The tax, which would apply to fewer than 100,000 U.S. residents, would raise an estimated $3 trillion over the next decade. It would be paid entirely by multimillionaires and billionaires who have reaped the lion’s share of wealth gains over the last four decades, including during the pandemic.
According to one analysis, almost half the revenue would come from the 650 billionaires who have seen their wealth increase more than $1.3 trillion since March 2020, and who together hold $4.2 trillion in assets.
A wealth tax would reverse more than a half-century of tax cuts for the wealthiest households. Billionaires have seen their taxes decline roughly 79% as a percentage of their wealth since 1980. The “effective rate” on the billionaire class — the actual percentage paid — was 23% in 2018, lower than for most middle-income taxpayers.
The revenue from a wealth tax could be deployed to pay for pandemic emergency measures as well as urgently needed public investments in infrastructure, education and health care.
It will be opposed by “born again” Republican deficit hawks who voted for Trump tax cuts for the wealthy and other deficit spending, adding $7.8 trillion to the national debt during the Trump presidency. In 2017, 278 Republicans voted for a $2 trillion tax cut whose benefits went disproportionately to the wealthy and to a couple hundred global corporations.
Earlier this month, not a single Republican voted for an almost $2 trillion pandemic relief bill to provide stimulus checks, vaccine distribution, aid to reopen schools and extended unemployment benefits to those whose lives have been upended by COVID-19.
Members of the billionaire class have used their clout to rig the economy in their favor while blocking popular actions, such as reducing student debt and boosting the minimum wage. A wealth tax chips away at the money power that circumvents campaign finance rules. It puts a brake on the buildup of democracy-distorting concentrations of wealth and power.
ONE REAL CONCERN is that the wealthy will find ways to avoid a wealth tax. Billionaire investor Leon Cooperman recently objected to the tax because “people are going to rush to find ways of hiding their wealth.”
The super-wealthy will be able to hire a “wealth defense industry” of tax attorneys, wealth managers and accountants to play shell games with their assets. In my new book, “The Wealth Hoarders,” I chronicle how these advisers are paid millions to hide trillions using offshore bank accounts, anonymous shell companies and dynasty trusts.
But with political will and leadership, this global wealth-hiding system could be fixed through increased enforcement and by banning trusts and tax scams that exist solely for the purposes of tax dodging. The U.S. should join other nations in boosting transparency and information sharing to shut down illicit money flows.
A wealth tax could begin to reverse four decades of extreme income and wealth inequality and build an economy that works for everyone, not just the wealthy.
