The Billionaire Class in the U.S. Is Now Bigger Than Ever – We Need Progressive Taxation Now.
A new, disturbing milestone has been confirmed with the release of Forbes Magazine’s 38th annual World Billionaires List. The US 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 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 percent 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 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 twenty-five 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 one percent. 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 Senator Ron Wyden (D-Oregon). 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 percent, between January 2023 to January 2024. A billionaire who purchased Microsoft stock last January would have to pay a 20 percent 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 five percent 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 US 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.
[Omar Ocampo is a researcher at the Program on Inequality and the Common Good at the Institute for Policy Studies.]
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