Conventional economic wisdom says a time of crisis is not the moment to enact tax increases. But, as Eric Toder at the Tax Policy Center recently pointed out: “[Tax experts] can begin to think of the time after the pandemic passes and how government should respond to massive increases in the public debt, and the new tax increases that Congress will need to enact to fund them.”
Initial tax increases should hold harmless working- and middle-class families who will be the most economically vulnerable coming out the pandemic. The first several trillion in new revenue should come from America’s wealthiest households, those who have seen their taxes slashed over past decades.
At the top of the list of new tax increases should be a wealth tax on our billionaire class.
A new Institute for Policy Studies Inequality briefing paper, authored by Bob Lord, reveals that between 1980 and 2018, the taxes paid by America’s billionaires, when measured as a percentage of their wealth, decreased a staggering 79 percent.
The only appropriate metric by which to measure the tax burden on billionaires, the briefing paper explains, is the rate of tax they pay on their wealth. Unlike the rest of us, the living expenses of billionaires do not constrain their accumulation of wealth. Nor do they rely on their work to generate additional wealth. For billionaires, the accumulation of wealth is driven forward almost exclusively by the growth of their existing wealth and constrained almost exclusively by the tax they are required to pay. No matter how the taxes imposed on billionaires are determined — by income, consumption, property ownership, transfers by gift or bequest — they function only as a tax on wealth.
By allowing the tax burden of billionaires, as a percentage of their wealth, to plummet since 1980, policy makers have caused the nation’s wealth to concentrate obscenely at the very top. In the 12 years between 2006 and 2018, IPS reports, nearly 7 percent of America’s real increase in wealth, measured in 2018 dollars, went to the top 400 billionaires. If the pattern of the past four decades does not change, an even greater share of the nation’s newly created wealth over the next 12 years will flow to the billionaire class.
As we emerge from this pandemic with trillions of additional debt on the nation’s balance sheet, substantial tax increases are inevitable. Early out of the box should be a 10 percent surtax on the incomes of the top 0.1 percent of households, including on capital income. We should also strengthen the estate tax to limit the intergenerational transfers of wealth of billionaires. But central to the program should be a tax that limits the further accumulation — that is, hoarding — of wealth by the billionaire class. That, the IPS report concluded, requires a wealth tax:
Only an annual wealth tax — a direct tax on billionaire wealth — can reliably limit the Billionaire Class rate of wealth accumulation to a level no greater than wealth accumulation for the population at large. Other forms of taxation have valid purposes. But to rein in the Billionaire Class we need something more. And rein in we must.
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