On Monday, 18 billionaires and multi-millionaires penned an open letter to the 2020 presidential candidates urging a “moderate wealth tax” on the fortunes of the richest sliver of Americans. Among them, Abigail Disney, Stephen Silberstein, and Molly Munger are members of the Patriotic Millionaires. Others, like venture capitalist Nick Hanauer, have made public statements like this before. To the rest, we say “welcome to the club.”
It is well-established that most Americans believe that the rich aren’t paying their fair share. Alexandria Ocasio-Cortez raised eyebrows when she suggested a 70% tax rate on incomes greater than $10 million, but even a Fox News poll found that voters want higher taxes for that bracket, much to the consternation of Fox News hosts. Most Americans also support other measures to make sure we’re paying our fair share like Elizabeth Warren’s wealth tax proposal, which would levy a 2 percent tax on assets over $50 million and 3 percent over $1 billion. 74% of registered voters support her proposal, and even a majority of millionaires agree.
Raising income taxes on the super-rich obviously resonates with Americans who see significant chunks of their own income coming out of every paycheck, but “income” is only a part of what makes rich people rich. Most of rich folks aren’t rich because of how much they make in a year, but because of how much money they already have. If they put their net worth into an ordinary savings account, any billionaire could live a life of luxury on the interest alone, to say nothing of the significantly higher rate of return on virtually every other investment opportunity available to wealthy Americans.
There is no good reason for someone to have that much money while more and more Americans find themselves falling into poverty and homelessness. Corporate profits and the cost of living rise year after year, but wages remain the same. This is because instead of supporting local businesses and investing in the types of ventures that lead to higher wages and more jobs, most wealth collects dust (and interest) in some already rich CEO’s investment portfolio. Simply put, wealth is wasted on the wealthy.
Taxing wealth directly gets at both the cause and effect of inequality in America without laying a finger on ordinary Americans. Warren’s proposal would have absolutely no impact on anyone with less than $50 million in assets. The people who signed the letter are some of the incredibly few people that would be affected by it, and they recognize, like virtually everyone else, that they can afford to pay a little more.
The underlying idea behind a wealth tax isn’t anything new. As Warren herself has pointed out, homeowners across America already pay a wealth tax every year based on the value of their home – it’s just called a property tax. Yet rich people own all kinds of property that goes untaxed, from status symbols like “diamonds, yachts, and Rembrandts” to intangibles like stocks, bonds, and other financial instruments. Rich people should play by the same rules as everyone else.
Even the most self-made millionaire’s wealth depends on certain background conditions like a consumer base that can afford to buy products. When those conditions are comprised and workers are so squeezed they can’t meaningfully participate in markets, the forces of demand, competition, and entrepreneurial opportunity that drive those markets fall apart. This is bad for workers and consumers in the short term, and ultimately bad for business as markets run dry. When rich folks hoard money, they’re trading the long-term viability of the American economy for their own instant gratification, and they’re pulling up the ladder they climbed behind them.
Brows furrowed, pundits will sigh and lament that it’s hard to assess the value of some assets, and to keep the super-rich individuals it would impact from dodging these taxes. But these are reasons to get it right, not to shrink from the challenge. At the end of the day, the economic health of our country is determined not by the size of its biggest bank account but by the ordinary American’s prosperity. It’s time to tax the excessive wealth of the super-rich.
