Opinion The Limits of Wealth-Tax Populism
New report reignites push for wealth tax
A blockbuster ProPublica report on the taxes paid by the richest Americans is reigniting a push from progressives for a wealth tax.The report, based on tax-return data ProPublica received from an anonymous source, details how prominent billionaires like Jeff Bezos and Elon Musk have paid little to no taxes in some recent years, particularly when compared to their wealth gains.The article comes as President Biden has proposed raising taxes on the wealthy and corporations to pay for his major spending proposals.
The American tax code is. And billionaires can afford to assemble teams of advisers dedicated to innovating bespoke schemes for making our tax laws even more generous. As a result, the very richest among us than working-class families.
All this has been apparent for a long time. But thanks to some public-spirited criminal with access to the closely guarded files of the IRS, the precise terms of the billionaire class’s sweetheart deal grew more visible this week. According to, between 2014 and 2018, the 25 richest Americans collectively grew $401 billion wealthier, while paying only 3.4 percent of that sum to Uncle Sam.
ProPublica's bombshell tax investigation reportedly has lawmakers eyeing policy changes. One senator who designed a key corporation tax cut says it wasn't supposed to let 'multibillionaires' avoid tax.
Republican Sen. Patrick J. Toomey, who authored 2017 tax reforms, said his intention "was not that multibillionaires ought to pay no taxes."The nonprofit news site ProPublica published a report on Tuesday showing how much the 25 richest Americans - including Jeff Bezos, Elon Musk, Warren Buffett, Bill Gates, and Mark Zuckerberg - paid in tax. The report highlighted how two key tax loopholes benefit billionaires.
In response to this revelation, progressives have redoubled their calls foron the superrich in general and on ultramillionaires’ wealth in particular. Democratic Senators Elizabeth Warren and Ron Wyden have led this charge, flanked by legions of left-wing pundits. Their cause is a righteous one, but imposing an annual toll on Jeff Bezos’s fortune — and soaking the superrich more broadly — won’t get us too far down the road to a just economic order.
To elucidate this point, let’s explore a simple (and stupid-sounding) question: Why is it bad that the superrich pay low tax rates?
Oneis that plutocratic tax avoidance prevents America from building a proper welfare state. After all, every dollar that sits in Elon Musk’s bank account is one that can’t be spent on public goods. During her presidential campaign, Warren that the U.S. could have universal child care, free public college, affordable housing, and various other permanent social programs — if only the ultrawealthy forfeited a small fraction of their fortunes to the taxman every year.
Opinion: America's tax system is rigged to protect the rich and powerful
Jeffrey Sachs writes the US tax system is designed to protect wealthy individuals and powerful corporations, and it is breaking the country in more ways than one. Much of the Republican Party lives and breathes to protect the rich and powerful from paying taxes, and Democrats like Sen. Joe Manchin of West Virginia too often side with them. Meanwhile, public opinion -- strongly supporting higher taxes on wealthy Americans and corporations -- counts for little because the rich have undue influence over the political class. © Getty Images But the severity of the problem cannot be overstated.
But this almost certainly isn’t the case.
The economic constraint on federal spending is inflation, not dollars. No matter how many bucks Jeff Bezos hoards, the U.S. government will not run out of them, because the U.S. government can print dollars at will. What Uncle Sam can’t do is mint real resources. At any given time, there are only so many workers, factories, yoga studios, etc. available for commerce. Public policy can increase the supply side of the economy to a point, but if Congress exponentially increased its deficit spending — by debt-financing a Nordic-style welfare state, say — then too many dollars would chase too few goods and services, and prices would soar.
Once you accept that the real constraint on public spending is scarce resources — not scarce dollars — then the connection between America’s undertaxed megabillionaires and its underfunded welfare state becomes rather tenuous. “Paying for” new social programs with taxes on billionaires is great politics. From the standpoint of inflation prevention, however, it’s much like paying for programs through deficit spending: If you finance a child allowance with a wealth tax, then the working class’s collective consumption will go up significantly, while the ultrarich’s consumption will be scarcely affected. (Elizabeth Warren’s wealth tax would have cost Jeff Bezos $5.7 billion last year. It is implausible that Bezos would drastically reduce his personal spending if he were worth “only” $183.3 billion instead of $189 billion.) The end result will be more dollars in circulation.
Democrats face new pressure to raise taxes
Democrats are under pressure to increase taxes on the wealthy following a blockbuster report on the taxes of prominent U.S. billionaires. The report by ProPublica, published last week, focuses on how many of the wealthiest Americans pay little in taxes when compared to their wealth gains. The Biden administration and Democratic lawmakers have floated tax changes that would target wealth and investment gains, but some Democrats have raised concerns about these ideas. Progressives think that they could get additional momentum in light of the ProPublica article.
Of course, one could theoretically raise the wealth tax to a confiscatory level (while, somehow,and fleeing the country before their wealth is expropriated). But your fiscal policy cannot simultaneously abolish the ultrarich through expropriation and fund new social programs by taxing the ultrarich.
Personally, I believe that establishing a child allowance and investing in green jobs is much more important than minimizing inflation. And since Democrats have little will to tax anyone but the ultrarich — and operate under the delusion that limited dollars constrain spending — I wholeheartedly support Joe Biden’s plan to “pay” for his modest expansion of social welfare and green investment with taxes on the wealthy.
But if progressives want to make Warren’s campaign plans a reality, and bring something resembling social democracy to the United States, then they’ll have to overcome the American public’s allergy to broad-based taxation. Anti-0.1 percent populism is a sound political creed for a center-left party that ison the support of affluent professionals. But, eventually, progressives will need to soak the Romney-Clinton suburbs or forfeit the bulk of their agenda.
Leak of billionaires' tax data draws GOP outcry over privacy
WASHINGTON (AP) — Republicans in Congress are alarmed by the leak of confidential IRS data to the investigative news organization ProPublica, enabling it to reveal that famous billionaires including Warren Buffett, Bill Gates and Mark Zuckerberg paid little in U.S. income tax at times. A senior IRS official said Thursday that a federal criminal investigation into the leak has been requested. Taking a detour from the debate over President Joe Biden’s tax overhaul plan, the GOP lawmakers are demanding to know how the private tax data was disclosed and they are pressing the Treasury Department and the IRS to pursue anyone who violated the law.
A second prominent answer to our opening question goes like this: We need billionaires to pay higher taxes because concentrated wealth is antithetical to democracy. As the economists Gabriel Zuman and Emmanuel Saez, “Wealth is power. An extreme concentration of wealth means an extreme concentration of power: the power to influence government policy, the power to stifle competition, the power to shape ideology. Together, these amount to the power to tilt the distribution of income to one’s advantage.”
This is absolutely right. The best reason to tax the super-wealthy is to make them less super-wealthy. Last year, Americans spent roughlyon their presidential election, making it the most expensive campaign in history. Bezos could have spent that same sum trying to influence the election (through ads, super PACs, field offices, etc.) and still grown $60.6 billion richer over the course of 2020. Of course, Bezos did not do that. But his latent power to spend at that mind-bending scale serves as a de facto veto on Congress’s power to challenge Amazon’s core interests. The collective economic power of America’s financial elite, meanwhile, is reflected in our tax code’s generous treatment of capital income, and the
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So, wealth-tax proponents are right that concentrated economic power is antithetical to democracy. But no one in American politics is proposing a wealth tax large enough to meaningfully redress the problem that Zucman and Saez identify. As already noted, Warren’s wealth tax would cost Bezos a tiny fraction of his fortune. And it would scarcely put a dent in the broader economic elites’ wildly disproportionate influence over politics, culture, popular ideology, and, of course, economic development.
One can imagine a tax policy comprehensive enough to radically diminish that influence. But good luck getting Congress to pass such a plan. As is, Democrats don’t appear to have the votes to restrictthe law that allows Americans who inherit unrealized capital gains to cash them out without paying a cent in taxes. Joe Biden’s proposal actually allows wealthy heirs to retain this tax break on their first $1 million of inherited assets — and it has still attracted among moderate Democrats in the House and Senate.
The contradiction between concentrated wealth and democracy is inherent in capitalism. And, historically, the only force that has managed to check the economic, social, and political power of moneyed elites has been.
None of this means that a wealth tax is undesirable. What it does mean, though, is that anti-.01 percent populism has major limitations. Soaking the Bezoses and Musks of the world will not be sufficient to finance social democracy, nor to meaningfully reduce elite domination of democratic politics. And by all appearances, it is not politically possible to impose confiscatory taxes on the billionaire class, let alone collect them. Given the average annual rate of return on capital, Warren’s wealth tax would merely slow the growth of massive fortunes, not reduce them. Yet even that proposal looks too radical to pass through America’s
Getting Congressional Democrats to impose modest tax increases on the ultrarich — so as to finance modest increases in socia-welfare spending — is a worthy near-term goal. But the progressive movement’s broader aims can only be realized through middle-class tax increases and working-class power.
Ireland, loved by Biden, is obstacle to tax deal .
One of the countries that poses a major obstacle in the push toward a global minimum tax rate has deep ties to President Biden.Ireland, a tax haven for many household name companies, would lose out if major industrial countries move forward with plans to subject multinational corporations' income to a tax rate of at least 15 percent.Finance officials in the wealthy Group of Seven (G-7) countries, which does not include Ireland, backed a global minimum tax rate of at least 15 percent in a deal announced over the weekend.