Sen. Elizabeth Warren (D-Mass.) has jolted the body politic with a bold proposal to tax the concentrated wealth of the richest 75,000 households in the United States. It’s about time someone took up this mantle.
Warren’s proposal would levy an annual 2 percent tax on wealth over $50 million, with the rate rising to 3 percent on wealth over $1 billion. Jeff Bezos, the wealthiest man in the country, would pay $4.1 billion under the new tax.
The United States has a proud tradition of breaking up concentrated wealth. The first federal progressive income and estate taxes date from the first Gilded Age, over a century ago. That’s when President Theodore Roosevelt observed, “Of all forms of tyranny, the least attractive and the most vulgar is the tyranny of mere wealth, the tyranny of a plutocracy.”
The wealth tax that Warren proposes would raise substantial revenue — by one estimate almost $3 trillion in the next decade. This would be a substantial boost for spending on green infrastructure, affordable higher education, and other investments that could expand opportunity.
But more fundamentally, the tax would be an investment in protecting democracy from the “tyranny of a plutocracy” that worried Roosevelt. Today’s massive concentrations of wealth also are concentrations of political and economic power, which are disruptive to democracy, social cohesion and economic stability for everyone.
Over the past four decades, wealth has flowed upward into the hands of the wealthiest 1 percent at an ever-accelerating pace — they now own 40 percent of the nation’s wealth, while the share owned by the bottom 90 percent has steadily fallen.
The higher you go up the economic ladder, the more concentrated wealth becomes. The Forbes 400, the richest billionaires in the United States, own more than the combined wealth of nearly two-thirds of the United States — including all black households, plus a quarter of Latino households, combined.
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In fact, three men — Bezos, Bill Gates and Warren Buffett — are wealthier than the entire bottom half of the country combined. And while politically active wealth dynasties such as the Walton, Koch and Mars families have seen their wealth skyrocket by over 6,000 percent in recent decades, median American wealth is on the decline — and 1 in 5 of us now has zero or even negative wealth.
Most progressive solutions to this inequality have focused on taxing income at the very top at a higher rate. But taxing income alone fails to address these multi-generational icebergs of wealth and power.
Warren’s idea has ample precedent. Several European countries — including Spain, Norway and Switzerland, among others — have annual net worth taxes. Most tax over a very high threshold. (The French solidarity tax, before it was abolished by President Emmanuel Macron, applied only to assets over $1.4 million.)
In fact, we already tax wealth in various forms here in the United States. The federal estate tax, our nation’s only levy on the transfer of inherited wealth, was established in 1916. It is paid exclusively by multi-millionaires and billionaires, starting at $11.4 million for an individual and $22.8 million for couples in 2019.
Most local jurisdictions tax wealth in the form of property, such as real estate and cars, based on their value. Middle-class families pay these taxes all over the country. What’s missing is an annual wealth tax focused on the billions held by those at the top.
Like a century ago, today’s extreme wealth inequality requires a direct tax on wealth. A once-in-a-lifetime estate tax, or a more steeply progressive income tax alone, will not put a sufficient brake on dynastic wealth. Warren’s proposal would galvanize a populist movement that has been pointing out for decades the corrosive impact of concentrated wealth on our body politic.