A Challenge for Democrats: Getting the Stockholders to Embrace a Stockholder's Tax

Wealthy Americans seem to think of taxes as a form of socialism. They believe they've earned everything they have, and refuse to subsidize 'welfare' recipients. The Guardian notes that "People in the US are about twice as likely as Europeans to believe that the poor are lazy and that hard work leads to higher quality of life in the long run."

But wealthy Americans enjoy a much more lucrative type of socialism. As Investopedia puts it, "When companies, even those that are publicly traded, are profitable, it's the shareholders who reap the rewards. Therefore, only a certain group of people benefit. But when the losses these companies experience are steep, taxpayers must bear the brunt."

The rich are certainly reaping those rewards now. The wealthiest 10% of Americans own 93 percent of the stock market. (The richest 10% of U.S. adults approximately matches the number of U.S. millionaires.) And fortuitously, for them, most of their windfall has derived passively as the S&P 500 has gained a pre-inflation average of over 10 percent annually over the past half-century.

The Coming Market Correction

In recent years stock market valuation has increased so dramatically, and so rapidly, that a correction similar to the dot-com bubble of the 1990s may be inevitable. The so-called Buffett Indicator, named after billionaire Warren Buffett, reflects the highest-ever disparity between stock market valuation and the GDP. Buffett believes, according to Yahoo! Finance, that "the market economy has become more and more 'specialized' with 'economic rewards flowing to people with specialized talents.' This, he says, has caused the wealth gap with many people barely getting by while others thrive."

Stock market gains reflect our productive past. All of us should reap some reward from that long-term effort.

Large-scale public wealth funds have been proposed to correct the imbalance. Funding would come from a Financial Transaction Tax or some form of levy on market capitalization. The argument for a Financial Transaction Tax has been made for years by economists like Dean Baker and lawmakers, including Sens. Elizabeth Warren and Bernie Sanders. An alternative is a small tax on stock holdings.

Why Stockholders Should Embrace an Investment in America

The total U.S. stock valuation as of early September, 2025 was about $65 trillion. Just a two percent tax on that amount would return $1.3 trillion. Each one of America’s 132 million households would earn approximately $10,000. Alternatively, about $5,000 per adult. Everyone, rich or poor, would share in America's prosperity, a prosperity born of 80 years of contributions by millions of Americans.

There’s a good reason for stockholders to welcome a modest annual tax on stock holdings, and to consider it an Investment in America. As noted by reliable financial sources, consumer spending directly influences stock market performance. With the massive trillion-dollar surge in consumer spending, stock market growth is likely to make up that smallish capital holdings tax, and then some.

Is it feasible? It's been proposed in the past. The Peoples Policy Project noted that At the end of 2017, the market capitalization of listed domestic companies was $32.1 trillion. A one-off 3 percent market capitalization tax would thus bring in around $1 trillion of assets. And it's certainly manageable. Investopedia points out that "Every brokerage has a stock record department that is charged with maintaining accurate records of all of its transactions on behalf of clients." Thus the process would be reduced to accounting transactions.

Objections? In the short run, returns will be reduced for investors. In the long run, funds may be transferred to bonds, foreign stocks, or other alternative investments. The stock market may be less liquid if trading activity slows. And of course, the millionaires who own almost the entirety of the stock market will resist even a small percentage payback to the country that made them rich. Conservative sources will find fear-inducing reasons to oppose the idea, as when the Wall Street Journal lamented that "A tax on securities trades would...create large economic and societal distortions." Of course, the increasing wealth gap has already created large economic and societal distortions.

Objections notwithstanding, it's certainly worth paying a nominal amount to stimulate the economy and boost one's own stock portfolio. And to address the GDP/stock disparity reflected by the Buffett Indicator, thus lessening the chances of a market crash.

In the big picture, American productivity is the result of 80 years of progress in technology and medicine and finance and numerous other industries, and it derives from the sweat and inspiration of all of our parents and grandparents. Stock market gains reflect our productive past. All of us should reap some reward from that long-term effort. All of us, including the super-rich, stand to gain by an investment in our long-productive nation.