America’s inequality crisis will not be fixed until the public embraces the idea that the accumulation of vast wealth is wrong. Until then, we’ll settle for the government embracing it. Bernie Sanders today rolled out a wealth tax plan that does the job.
Ever since Thomas Piketty’s Capital in the 21st Century drove home the danger of perpetually increasing inequality, advocates (including Piketty himself) have been calling for some kind of wealth tax. It’s common sense. Income taxes will not substantially reduce great fortunes, which are stashed in existing valuable assets, and estate taxes, which would tax the fortunes when someone dies, have been decimated systematically by the Republican party. What we need is an annual wealth tax, that can take a bit out of huge fortunes each year. Elizabeth Warren proposed such a tax months ago, which was a significant breakthrough for a mainstream presidential candidate. Warren’s proposal was “a 2 percent wealth tax on Americans with assets above $50 million, as well as a 3 percent wealth tax on those who have more than $1 billion.” Sanders goes even higher.
Major elements of Bernie’s wealth tax include:
- An annual one percent tax on household net worth over $32 million—the top one-tenth of one percent of Americans.
- “The tax rate would increase to 2% on net worth from $50 million to $250 million, 3% from $250 million to $500 million, 4% from $500 million to $1 billion, 5% from $1 billion to $2.5 billion, 6% from $2.5 billion to $5 billion, 7% from $5 billion to $10 billion, and 8% on wealth over $10 billion.”
- Stricter reporting laws and increased IRS funding and audits to make tax evasion more difficult.
- A 40% to 60% “exit tax” on people trying to move wealth overseas to escape the wealth tax.
Analysis of the Sanders plan by Gabriel Zucman and Emmanuel Saez, two leading economists studying inequality and tax evasion, finds that it would “entirely close the gap in wealth growth between billionaires and the average American family,” which is to say that it would stop the wealth of billionaires from growing faster than the wealth of average people. They also find that “if the Sanders wealth tax had been in place since 1982, the wealth owned by the Forbes 400 richest Americans would be only 40% of what it is today.” (Despite this, the share of American wealth held by those people would still have risen over that time period, illustrating the fact that this wealth tax is not radically confiscatory in the grand scheme of things.)
They also produced this helpful chart outlining the wealth tax proposals of both candidates:
One of the most important things we can accomplish in American politics is the creation of a wealth tax. After that, one of the most important things in American politics will become protecting that wealth tax.