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billionaire tax
'Let's Go!' Top Economist Applauds as Harris Signals Support for Billionaires Tax
Gabriel Zucman, a leading authority on tax evasion by the rich, welcomed news that Kamala Harris' presidential campaign is embracing proposals to tax the ultra-wealthy and large corporations.
Aug 20, 2024
An economist at the forefront of the growing global push for a billionaire wealth tax is welcoming news that U.S. Democratic presidential nominee Kamala Harris is embracing calls for a minimum levy on the United States' richest individuals.
"Let's go!" Gabriel Zucman, an economics professor at the University of California, Berkeley, wrote Tuesday in response to Semaforreporting on the Harris team's endorsement of taxes on ultra-wealthy individuals and large corporations proposed in President Joe Biden's budget for Fiscal Year 2025.
Semafor highlighted a "little-noticed portion" of an analysis released late last week by the Committee for a Responsible Federal Budget, which wrote that Harris' campaign "specifically told us that they support all of the tax increases on the high earners and corporations that are in the Biden budget."
That budget blueprint includes a 25% minimum tax on billionaire wealth, much of which is unrealized capital gains that are not currently subject to taxation. A recent analysis by Americans for Tax Fairness estimated that U.S. billionaires and centi-millionaires collectively held at least $8.5 trillion in unrealized capital gains in 2022—a massive untapped source of federal revenue.
U.S. billionaires have seen their collective fortunes grow by more than $2 trillion since former President Donald Trump—the GOP's 2024 nominee—signed into law massive tax breaks for the rich and big corporations. Trump has campaigned on extending the deeply regressive and unpopular tax cuts and slashing rates for large companies even further.
Surging billionaire wealth at a time when roughly two-thirds of Americans are living paycheck-to-paycheck has amplified calls for a minimum tax on the richest Americans. Zucman noted in a May New York Times piece that in 2018, U.S. billionaires paid a lower effective tax rate than working-class Americans for the first time in the nation's history.
"The idea that billionaires should pay a minimum amount of income tax is not a radical idea," Zucman wrote in May. "What is radical is continuing to allow the wealthiest people in the world to pay a smaller percentage in income tax than nearly everybody else."
Polling has shown that a 25% tax on billionaire wealth is extremely popular with U.S. voters across the political spectrum. A survey in March of last year by Data for Progress found that 87% of Democrats, 68% of Independents and third-party voters, and 51% of Republicans back the idea.
A spokesperson for the Harris campaign confirmed to NBC News on Monday that in addition to backing the push for a minimum tax on billionaires, the vice president supports raising the corporate tax rate from 21% to 28% as a way to help finance parts of her broader economic agenda, which includes an expanded child tax credit and substantial assistance for first-time homebuyers.
The campaign spokesperson called the move—which would still leave the corporate tax rate lower than it was when Trump first took office in 2017—a "fiscally responsible way to put money back in the pockets of working people and ensure billionaires and big corporations pay their fair share."
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Blueprint Shows Why Only Real Barrier to Global Billionaire Tax Is 'Political Will'
"Thanks to recent progress in international tax cooperation, a common taxation standard for billionaires has become technically possible," says leading economist Gabriel Zucman.
Jun 25, 2024
Renowned economist Gabriel Zucman released a blueprint Tuesday showing the world's governments that a global minimum tax on billionaires would be both technically feasible and economically beneficial, leaving political will as the only major obstacle preventing transformative changes to an international tax structure long exploited by the ultra-rich.
Zucman, an economics professor at the University of California, Berkeley and a leading expert on tax evasion, estimated in the new analysis that a 2% minimum tax on the wealth of global billionaires would raise between $200 billion and $250 billion annually in revenue from roughly 3,000 individuals globally, resources that "could be invested to support sustained economic development through investments in education, health, public infrastructure, the energy transition, and climate change mitigation."
Billionaires in countries around the world—including France and
the United States—pay lower effective income tax rates than those in the working class, often making use of holding companies and other complex maneuvers to dodge their obligations and stockpile massive fortunes. The world's billionaires collectively own $14.2 trillion in wealth, according toForbes data.
Zucman argued in his blueprint—
commissioned by the government of Brazilian President Luiz Inácio Lula da Silva—that structuring a new tax based on a specific percentage of billionaires' wealth would prevent ultra-rich individuals who report little to no taxable income from completely avoiding taxation. He also notes that the wealth of billionaires is easier to calculate than income flows, given that "at the top of the wealth distribution, the bulk of wealth consists of shares in companies."
"Fundamentally, this minimum tax should be seen not as a wealth tax, but as a tool to strengthen the income tax," Zucman wrote. "A billionaire who already pays the equivalent of 2% of their wealth in income tax (e.g., because that person realizes a significant amount of capital gains or earns a significant amount of dividend income directly) would have no extra tax to pay. Only billionaires who currently pay less than 2% of their wealth in tax would have to pay more."
The best way to address this failure would be with a common minimum standard
Billionaires should pay in tax the equivalent of at least 2% of their wealth each year (instead of the ~0.3% they pay today)
This would erase regressivity at the very top pic.twitter.com/2NutewKQYP
— Gabriel Zucman (@gabriel_zucman) June 25, 2024
Numerous potential challenges could arise should nations attempt to move forward with a minimum tax on billionaires, Zucman noted, including difficulties obtaining accurate estimates of rich individuals' fortunes—which are often hidden away in tax havens—and insufficient coordination between countries, as well as likely efforts by billionaires to evade the tax by shifting assets abroad.
But Zucman argues such obstacles can be overcome in the process of designing the minimum tax, which he described as the "most powerful tool to improve the effectiveness of the taxation of ultra-high-net-worth individuals because it ensures that no matter the avoidance strategies these taxpayers may use, the amount of tax effectively paid cannot fall below a certain amount."
"How to ensure an effective taxation of ultra-high-net-worth individuals if some jurisdictions decline to implement this standard? Two main policies could be implemented: first, measures to strengthen mechanisms to limit tax-driven international mobility; second, mechanisms to incentivize broad participation in the agreement," Zucman wrote. "Many countries have rules in place to limit tax-driven changes in residency of high-net-worth individuals, including exit taxes. Countries implementing the minimum tax standard could build on these rules and strengthen them."
The primary barrier to establishing a global tax on billionaires is not technical, Zucman argued, but political, particularly given the sway the ultra-rich have over economic policy.
"The goal of this blueprint is to offer a basis for political discussions—to start a conversation, not to end it," Zucman wrote. "It is for citizens to decide, through democratic deliberation and the vote, how taxation should be carried out. I hope this report will contribute to this democratic discussion."
"Thanks to recent progress in international tax cooperation, a common taxation standard for billionaires has become technically possible," he added. "Implementing it is a question of political will."
Recent statements by world leaders and survey data indicate that a global tax on billionaires is increasingly popular—even among millionaires. A YouGov poll released earlier this week found that 59% of U.S. millionaires would support a global tax on billionaires equal to 2% of their wealth, a proposal that U.S. Treasury Secretary Janet Yellen has thus far opposed.
In April, the finance ministers of Brazil, Germany, South Africa, and Spain argued in a Guardianop-ed that a minimum tax on billionaires would "boost social justice and increase trust in the effectiveness of fiscal redistribution" while also generating "much-needed revenues for governments to invest in public goods such as health, education, the environment, and infrastructure—from which everybody benefits, including those at the top of the income pyramid."
"Fighting inequality requires political commitment—a commitment to the objectives of inclusive, fair, and effective international tax cooperation," the ministers wrote. "Surely, it needs to go hand-in-hand with much broader approaches that reduce not only wealth inequality but also social and carbon inequalities. The challenges that lie ahead are huge, but we stand ready to engage in concerted multilateral action to tackle them."
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The US Billionaire Class Is Richer Than Ever and That’s Bad News for Democracy
The growth of billionaire wealth provides this class of tycoons the material resources to disproportionately influence our elections and tax policy to the detriment of the working-class.
Apr 04, 2024
A new, disturbing milestone has been confirmed with the release of Forbes Magazine’s 38th annual World Billionaires List. The U.S. billionaire class is now larger and richer than ever, with 813 ten-figure oligarchs holding $5.7 trillion firmly in their possession.
This is a $1.2 trillion increase compared to the year before, bringing total billionaire gains since mid-March 2020 to a gargantuan $2.7 trillion in current dollars.
The staggering upsurge in billionaire wealth over the last four years is further proof that our economy is designed primarily to benefit high-net-worth individuals. Profits are not held by the laboring masses who produce it. Instead, they flow into the bank accounts of the wealthiest Americans, who use those earnings and assets to undermine our democracy.
The good news is that Trump’s tax cut is set to expire on New Year’s Eve 2025. It provides us with an opportunity to implement a new tax regime that not only expands the revenue base of the federal government but also seeks to dilute extreme wealth concentration.
The resources of the billionaire class endow them with an enormous power to influence the political process directly and indirectly. Even when their preferred candidates are not in office, our democratic institutions are still more likely to respond to the policy preferences of the rich rather than the average voter, especially when it comes to taxes.
It is no secret that the vast majority of Americans, including 63% of Republicans, are supportive of measures that increase taxes on the wealthy. Yet our representatives consistently fail to deliver on this demand. A quintessential example of this was former President Donald Trump’s 2017 Tax Reform bill that promised to boost everyone’s income. It was the most unpopular piece of legislation to be approved and signed into law in the past 25 years.
A recent report by the Center on Budget and Policy Priorities revealed that the primary beneficiaries of Trump’s tax bill were the top 1%. They are set to receive an average tax cut of more than $60,000 in 2025 while the vast majority of workers will see no growth in wages or earnings.
The good news is that Trump’s tax cut is set to expire on New Year’s Eve 2025. It provides us with an opportunity to implement a new tax regime that not only expands the revenue base of the federal government but also seeks to dilute extreme wealth concentration.
President Joe Biden’s Billionaire Minimum Income Tax (BMIT) is one promising proposal. By raising the top tax rate and imposing a higher levy on the diverse income streams the top 0.01% receive from their assets, including a tax on unrealized capital gains, the BMIT seeks to tax the most economically privileged. It is estimated to raise $50 billion a year over the next decade, making our tax system a bit more equitable.
Another proposal was introduced by Sen. Ron Wyden (D-Ore.). The similarly named Billionaire Income Tax (BIT) is more straightforward in that it targets asset gains that can easily be tracked by the public, like a billionaire’s stock holdings in a publicly traded company.
Microsoft’s stock increased $142.82, or 63.5%, between January 2023 to January 2024. A billionaire who purchased Microsoft stock last January would have to pay a 20% capital gains tax—about $28 per stock purchased—under Wyden’s proposal, even if they had not sold any shares.
A well-designed progressive tax on billionaire wealth is an efficient alternate way to raise revenue.
A modest 5% tax on all wealth above a billion dollars levied today would raise more than $244 billion in 2024. And that’s likely an underestimation since there are several ten-figure oligarchs that keep their wealth concealed from Forbes. Wealth-X, a private research firm, identified 955 billionaires in their Billionaire Census last year, 142 more than what Forbes just registered.
But a wealth tax is not without its detractors. The wealth defense industry and its fellow travelers argue that the imposition of a wealth tax would hurt investment and innovation. But most innovation that occurs in the U.S. economy is driven by people worth less than $50 million. Plus, a modest wealth tax is unlikely to change billionaire behavior, but is instead likely to function “as a constraint on their rate of wealth accumulation.”
Others will point to the failure of wealth taxes in several European countries as proof as to why it is a bad idea. But research has demonstrated that their unpopularity was largely the result of poor policy design. Low wealth thresholds set by lawmakers hurt upper-middle-class households who did not have the cash to pay since their home was their most valuable or only asset. They consequently lobbied for a number of exemptions that were granted and later exploited by the ultrawealthy. The erosion of the wealth tax base led to a significant shortfall in the revenue collected by the state.
For a wealth tax to be effective, it must be applicable only to individuals and households with a very-high net worth. Billionaires possess an unfathomable amount of financial resources, meaning that liquidity constraints do not hinder their ability to pay wealth tax obligations.
Of course, a wealth tax alone is not enough to ensure the safety of our political democracy. The fact that billionaires spent $1.2 billion in the 2020 general election and more than $880 million in the 2022 midterms should be seen as a crisis of political inequality. This is a system designed for the rich. It makes our democracy less representative and limits electoral competition down to people who can curry favor with the ultrarich. Campaign finance reform is needed to prevent the further capture of our representative bodies.
We also need to strengthen working class institutions to expand economic democracy and prevent extreme concentrations of wealth from occurring in the first place. Trade unions not only increase the collective power of workers, but they also allow for a greater labor share of national income and close wage inequality gaps.
The growth of billionaire wealth provides this class of tycoons the material resources to disproportionately influence our elections and tax policy to the detriment of the working-class. The Inflation Reduction Act of 2022 is projected to give the IRS an unexpected windfall in tax revenue over the next decade. These resources will be critical in enforcing a tax on the top 0.01% and limiting the wealth concentration in the billionaire class. It is a great first step towards strengthening our political democracy and democratizing our economy.
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