Oligarchy Has Arrived. Congress Must Take Notice — and Act!
This is a guest post from our friend Bob Lord, who you may recall from previous guest posts. This was originally published a few days ago at Inequality.org – bmaz
The United States is experiencing a level of wealth inequality not seen since the original Gilded Age. This yawning gap between rich and poor has unfolded right out in the open, in full public view and with the support of both political parties.
A malignant class of modern robber barons has amassed unthinkably large fortunes. These wealthy have catastrophically impacted our politics. They have weaponized their wealth to co-opt, corrupt, and choke off representative democracy. They have purchased members of Congress and justices of the Supreme Court. They have manipulated their newfound political power to amass ever-larger fortunes.
The result? We can sum that up with a word usually associated with nations like Russia: oligarchy. Unless Congress takes action, inequality — and the instability inequality invariably produces — will only intensify.
The Patriotic Millionaires have been sounding out the alarm, over recent years, on inequality and oligarchy. More than most, our members — all men and women of substantial means — understand just how much wealth can buy. Wealth can even turn tax systems toxic.
In well-functioning democracies, tax systems serve as a firewall against undue wealth accumulation. By that yardstick, our contemporary U.S. tax system has failed spectacularly. Those of us in Patriotic Millionaires have witnessed that failure first-hand. Our nation’s current tax practices allow and even encourage obscene fortunes to metastasize while saddling working people with all the costs of that metastasizing. Years of this approach to taxation have hollowed out our middle class and our democracy.
Congress can change all that. Enter the OLIGARCH — Oppose Limitless Inequality Growth and Reverse Community Harms — Act. The architects of this legislation, led by Representatives Barbara Lee (CA-12) and Summer Lee (PA-12), have crafted a visionary approach to combat the existential threat to democracy we all now face. The OLIGARCH Act offers a powerful mechanism that can break the vicious cycle of unchecked wealth accumulation we now find ourselves trapped inside. That mechanism: a wealth tax tied directly to our level of inequality.
Enacting the OLIGARCH Act would create a dynamic tax structure that quickly responds to changes in our distribution of national wealth. The OLIGARCH Act’s elegantly straightforward solution builds upon a set of tax rates that escalate as a wealthy taxpayer’s wealth escalates:
- A 2 percent annual tax on wealth between 1,000 and 10,000 times the median household wealth.
- A 4 percent tax on wealth between 10,000 and 100,000 times the median household wealth.
- A 6 percent tax on wealth between 100,000 and 1,000,000 times the median household wealth.
- An 8 percent tax on wealth exceeding 1,000,000 times the median household wealth.
As inequality swells, in other words, the wealth tax would intensify, in the process acting as both a deterrent to wealth concentration and an antidote to it. As inequality recedes, our economic playing field would become more level. All of us would find ourselves better situated to flourish.
The OLIGARCH Act legislation also recognizes our fundamental need to counter tax evasion among the wealthiest households. By mandating a minimum 30 percent audit rate on ultra-rich households and instituting penalties for significant valuation understatements, the OLIGARCH Act would fortify our nation’s capacity to shut down tax manipulation and evasion.
We’ve reached a tipping point in our nation today. Extreme wealth is begetting extreme power, in turn begetting even more extreme wealth. The resulting stranglehold our richest hold over our democratic institutions has led to a government that caters to billionaires while working citizens struggle to make their voices heard. This imbalance doesn’t just weaken the integrity of our democracy. This imbalance emboldens extremist ideologies that thrive whenever masses of people become politically disillusioned.
We face a stark choice. Will we allow a handful of individuals to wield their wealth like a weapon against our nation’s bedrock principles? Or will we rise to the occasion, defend our democracy, and reaffirm our commitment to a society that offers real opportunity and disperses power — instead of letting that power concentrate among a fabulously wealthy few?
Those of us working with Patriotic Millionaires see the OLIGARCH Act as more than just a piece of legislation. We see it as a statement of purpose, a declaration that the American people will not stand idly by and watch the principles we hold dear erode away. We see the OLIGARCH Act as a call to action that asks each and every one of us to join the chorus demanding change. By urging our congressional representatives to co-sponsor and pass this transformative legislation, we pave the way for a future where democratic capitalism thrives, inequality recedes, and the American way of life endures.
Safeguarding our democracy, today more than ever, requires us to address the catastrophic — and rapidly growing — inequality that’s empowering a new aristocratic ruling class. To do anything less than challenge that class would leave our democratic institutions to the whims of America’s oligarchs. The stakes run that high.
Bob Lord, a veteran tax attorney and Institute for Policy Studies associate fellow, is currently serving as a senior advisor on tax policy for Patriotic Millionaires.
Good piece, but the first six paragraphs are repeated.
Ooops, that was my fault. Thanks!
Should be fixed now. Let us know if you see any other remaining problems. Thanks.
I believe the 13th amendment gives Congress the power to tax income, not wealth.
It would require a constitutional amendment.
My simple solution: eliminate any section of the tax code that contains the word “deferred”.
My accounting professor for income tax explained it: The rich have an endless sequence of tax deferral plans.
The law is written that someday, these defected taxes will be paid, but tax accountants and lawyers find ways to structure transactions the result in new referrals one after another, pushing the tax payment ever into the future.
I’m interested in the real world applications of the various tax rates proposed in this piece. In other words, what does the median household wealth mean? How would this proposal be any more fair than the system currently in place? I agree that our current tax system is inherently unfair to the vast majority of Americans, but I need to be educated on how in the real world a system based on median household wealth would work.
Household wealth is all a household’s assets (homes, vehicles, stock, companies, retirement funds, etc.) minus all the household’s debts (ie, loans and other outstanding obligations). It includes the collective wealth everyone in the household, no matter the source of the wealth.
Median household wealth would be the wealth of the household with exactly the same number of households who are wealthier than they are and the number who are less wealthy.
That seems very simple. But I suspect it isn’t quite as simple as it seems. And, when politics gets involved, it gets even more complicated. (Apologize for typos.)
it would require a bureaucracy of immense size.
I am open to suggestions but am also disinclined to reinvent the wheel. The Venetians in the Renaissance just did a simple capital levy. It would not be as simple today, but this Patriotic Millionaires proposal seems impractical to the point of impossibility.
When you’re dealing with large amounts of wealth, you can ignore the value of things like the PC I’m using now; you care about houses, investments, cars, art, and not much else (I think.) Might not even be as complicated as our current tax code if you don’t differentially tax, e.g., wealth in stocks, wealth in bonds, wealth in real estate…
I understand that I’m not the average member here. By Peterr’s definition of “household wealth,” my assets are the following:
– 100-year-old house needing work: real estate agents would love to sell it to investors for $50-60K which is laughable considering the (cash) price I paid for it (no liens on it)
– a (new 2021) Subaru six-speed (theft deterrent), fully paid for
– stock? companies? retirement funds? All IRA, pension, etc. went long ago to pay real estate taxes on the old house that I lost for R/E taxes
– my sole source of income is SSDI
I’m slightly above the county poverty level. Wiki claims for 2021 that “The median income for a household in the borough was $23,362…” for a population of about 2,000.
Where do I fit in the equalization plan?
Sounds like you have something like 70-100k total assets.
That puts you a bit below median household wealth, which means by this proposal you could have over a thousand times as much before it starts taxing you.
Some states already have wealth or asset taxes. Connecticut is one of them. For a national tax, the definition of taxable asset would need to be refined, as would the valuation rules.
Asset values change over time, for example; they go down as well as up, and this would need to be captured. Real estate, art, collectibles, intangibles (e.g. intellectual property rights) etc. Not everything is as easy to value as a well-traded corporate stock.
I also wonder about which definition of “household” will be used since this term is fundamental to the proposed wealth tax.
It seems that many current households may have multiple people of wealth whether they are related or not. If it were possible they could take their wealth and split it into multiple separate households thus lowering their tax burden. (IANACPA)
I believe it’s even beyond the wealth they have accumulated. The wealthiest have brought us the likes of Fox News, which has created a division left and right that masks the top to bottom gulf. And the intent is to keep the not-wealthy viciously divided. There are people who desperately need better education and healthcare but they seem to reflexively cry socialism at the thought of it. An educated populous can only mean lees wealth for the highest tier. You can’t cut a pie so everyone gets a bigger slice, so the rich eat the pie, the Middle Class wonders where it went, and the poor get blamed for eating crumbs, because Fox says so.
Per the US Census Bureau, the median household wealth in 2021 was $166,900.
So the first tier 2% wealth tax would kick in at $166,900,000.
Second tier 4% starts on wealth above $1,669,000,000.
Third tier 6% starts on wealth above $16,690,000,000.
Fourth tier 8% hits wealth above $166,900,000,000.
Those are some VERY high levels of household wealth. To put that in perspective, according to the Federal Reserve, the wealth level that put you into the top 0.1% of households in 2019 Q3 was $38,233,372.
We’re looking at a really small number of outrageously wealthy households that would be touched by this inequality wealth tax, and the amount they would be taxed would be peanuts by their standards.
I’m okay with this. It has no impact on people that have less than $170 million. Really hard to argue with that.
2% of $167M would be $3,340,000. Not that I have personal experience of that, but I think they could probably manage to work that into their household budget.
When you have enough wealth to be the sole funder of a Super Pac or own several businesses so that each is considered to be individual by The Supreme Court’s Citizen United decision then you have a skewed influence in our political system. So much wealth has enabled candidates to be self funded or well funded by 1 individual or business entity able to hire lobbyists holding out campaign cash for legislation.
How can a candidate’s pleas for $5 to $25 to supporters compete with that?
Why are Super Pacs allowed to hide their benefactors when we have limits placed on our donations to our preferred candidates? Along with the Oligarch Act we really need campaign finance reform.
Nobody should have over $20mil to begin with.
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Some examples:
If your net wealth is $167M, your tax is:
2% of ($167,000,000 – $166,900,000) = $2,000
Total: $2,000
If your net wealth is $1B, your tax is:
2% of ($1,000,000,000 – $166,900,000) = $16,662,000
Total: $16,662,000
If your net wealth is $2B, your tax is:
4% of ($2,000,000,000 – $1,669,000,000) = $13,240,000
2% of ($1,669,000,000 – $166,900,000) = $30,042,000
Total: $43,282,000
If your net wealth is $5B, your tax is:
4% of ($5,000,000,000 – $1,669,000,000) = $133,240,000
2% of ($1,669,000,000 – $166,900,000) = $30,042,000
Total: $163,282,000
If your net wealth is $10B, your tax is:
4% of ($10,000,000,000 – $1,669,000,000) = $333,240,000
2% of ($1,669,000,000 – $166,900,000) = $30,042,000
Total: $363,282,000
If your net wealth is $100B, your tax is:
6% of ($100,000,000,000 – $16,690,000,000) = $4,998,600,000
4% of ($16,690,000,000 – $1,669,000,000) = $600,840,000
2% of ($1,669,000,000 – $166,900,000) = $30,042,000
Total: $5,629,482,000
If your net wealth is $200B, your tax is:
8% of ($200,000,000,000 – $166,900,000,000) = $2,648,000,000
6% of ($166,900,000,000 – $16,690,000,000) = $9,012,600,000
4% of ($16,690,000,000 – $1,669,000,000) = $600,840,000
2% of ($1,669,000,000 – $166,900,000) = $30,042,000
Total $12,291,482,000
Assuming household income of $166,900,000,000, if this amount of income was invested in a NYSE composite index fund it would have earned just shy of 10% from last year September to now.
Doing absolutely nothing, adding nothing of value to the economy, just stuck in the market that amount of income would have earned $16.7 billion.
(ADDER: If taxed as Termagant breaks down just above, the example household still earns $4 billion after taxes. That’s more than enough to finance a run for president and fund enough congressional races to take Congress even after taxes.)
Tax the rich because you know they don’t stick the money in the market like this straight up. They stick it in shelters when they don’t buy into investments which both earn more than 10% and drain income of the lower nine deciles.
I’ll point to REITs in particular; the demand for increasing profitability from REITs is driving up speculation and pricing on real estate which in turn drives up inflation.
Just insanity: https://www.fool.com/research/reits-vs-stocks/
As wealth inequality increases, the median doesn’t move, just a little bit, correct? The wealth just gets shifted to the top percent. At any given time, the number of the households is in fact constant.
But the tax would still trigger as the medium is so low compared to what the top makes.
I get your point about this tax being peanuts to their wealth. This new proposed tax is not going to address the wealth distribution. And they are going to move their wealth outside of the US, to avoid even paying peanuts.
The question in my mind is how some of these people accumulate the wealth. They work in the same universe we all do, there are only 24 hours a day for them and for us. What could possibly justify a CEO of a company to make so much money? It is not that they are more productive then the others, or more creative, or more anything. We have a system that rewards meritocracy to a point, then it breaks down to protect the ceo types. At the ceo level, we celebrate individualism, while at workers level we expect to see the team work, nobody owns anything, we all are supposed to follow the plan that makes us replaceable at any point, except that on the top these rules don’t apply. Capitalism for the top, communism for the rest.
There’s distinct limits to their ability to move their wealth, though – yeah, they’ll move a lot of it (their yachts will all be flagged to some island, etc), but there are hard limits to their ability to move their companies, and their real estate wealth can’t be moved at all.
Income does not equal wealth, of course, so I think this view of the proposal isn’t accurate.
As to the proposal, I can’t find it on their website. Under “Our Work,” there’s just a series of abbreviated statements of intention, but no actual proposal. I didn’t go searching for it, presenting such a document in any forum, but most of all in a forum like this, should have a link to something of detailed substance.
And the devil will be in the “what qualifies for wealth and how do you ascribe it to individual taxpayers” details; if they had that sussed out, we’d have something of substance to discuss. I agree with the general concept and thrust, at any rate.
Biden, or so says political historian Heather Cox Richardson, is returning America to “the system under which the government operated from 1933 to 1981: the idea that investing in ordinary Americans builds the economy far more efficiently than so-called supply-side economics.” Bidenomics is a rejection of Reaganomics. Let’s not “both sides” the problem, please, and thank you.
This a theme Dr. Richardson’s daily ‘Letters From an American’ often returns to. You can read her Sept 1st letter that I borrowed this from here: https://heathercoxrichardson.substack.com/p/september-1-2023
As much as I’d like to see this tax enacted, it will never pass with the filibuster intact, and even if it passed, would almost certainly be declared unconstitutional.
Even if declared constitutional, I can’t believe billionaires wouldn’t be able to hide or shelter their wealth effectively from the IRS – look at Trump’s success over the past 50 years, at least until recently.
All manner of VATs, from a Tobin Tax on up & down. You day-trading churning securities? You got a money-laundering anonymous LLC buying Trump Tower (or Cypriot) apartments? Fine, we don’t give a shit about your anonymous ass. Economic transactions HAVE to be legally recorded somewhere at some point. Those are the points of transaction tax collection. And, yeah, spare me the Perfectionism Fallacy.
If the oligarchic uber-wealthy can’t transact (other than in bags of cash), they will no longer be uber-wealthy in short order. And the “cash transactions” have to show up somewhere to be part of an economy.
I see the “it will never pass” objection from a lot of people who strive hard to appear savvy to the ways of DC. Watch any panel on cable news and someone will jump to say it.
But if you look at the Congresional Record on a regular basis and filp back to the section on special orders and extensions of remarks, you’ll notice something.
They’re filled with speeches and statements on behalf of recently introduced bills which the sponsors know will never pass as written. So why do they do it?
Because the point of introducing a bill is not solely now — and never has been — simply to do the Schoolhouse Rock march to enactment. There is a tradition going back to the earliest days of Congress of introducing bills to make arguments and advance debate.
Name a famous member of Congress — Ted Kennedy, Thaddeus Stevens, John Quincy Adams — and I guarantee they sponsored or backed multiple bills they knew were not going to become a law. And they did it because they know that debates over bills that will become laws don’t happen in a vacuum, they happen in the greater context of the debate in Congress over issues which are influenced by every other bill in the hopper.
Jumping to the conclusion “it will never pass” isn’t actually a sign of being savvy, it’s a sign of missing the point. And it’s a sign of the vapidity of so many pundits that it’s the first thing out if their mouths. Sometimes it’s just vanity, sometimes it’s inability to understand how DC actually works, sometimes it’s a sign they don’t have any idea what they’re looking at.
It’s a good idea not to take cues from the stuffed shirts on CNN and Meet The Press, though.
I fully agree and support this bill and its introduction. The organization I work for has had plenty of legislative successes at the state level (New Mexico), but few of the bills we’ve supported passed the first time they were introduced. You gotta start somewhere, right?
Amen.
We’ve never had a national wealth tax. Pointing to “Trump’s success over the past 50 years” means nothing in this context, because that was all aimed at hiding INCOME, not wealth.
And more importantly, here’s the thing about wealth: for uber-billionaires, you *want* folks to know you are that rich. That’s the point. “My pile of stuff is bigger than your pile, or anyone else’s pile.” The Forbes 500 list of the most valuable companies is part of that, and so is their 100 richest people list. Trump famously lobbied to boost his ranking on the list, and the Musk-Bezos battle to be at the top is another example of wanting the world to know who is the richest. It’s not enough for many of them to have a bunch of money – the world has to know you have a bunch of money
Because there are no tax consequences to boosting your wealth, there’s nothing to keep someone like Trump, Musk, or Bezos from trying to be seen as richer than than they are. But if wealth were taxed, it would be very interesting to see how this would affect the self-promotion of these folks.
Think of it this way: if actually being the wealthiest meant actually paying the highest taxes, how much would Trump et al. want to be top of the list?
Look at Rick Scott’s ill gotten gains from his Medicare swindle hidden in The Grand Cayman Islands. He self funded his Florida Governor campaign( not certain of his Senate campaign).
https://www.tampabay.com/florida-politics/buzz/2018/08/27/rick-and-ann-scotts-financial-trail-leads-to-cayman-islands-tax-haven/#:~:text=Rick%20Scott%20and%20First%20Lady,for%20U.S.%20and%20foreign%20investors.
That article doesn’t mention the medicare “swindle”. His company was: Columbia HCA. At that time I believe it was the largest Medicare fraud in history.
My small software company had developed comprehensive HIPAA II compliant software. HIPAA II became federal law in early 2001.
Long story very very short: a code writer in Columbia’s IT department alerted us to Columbia having our source code, and illegally repackaging it into “in house” software. Even before we knew that, management/board made multiple requests as to whether our accounting could be “configured” to do absolutely illegal things.
I felt dirty walking out of there. It was a rude welcome to the big time, by absolute crooks.
Here’s the link to the Lee and Lee bill:
https://lee.house.gov/imo/media/doc/oligarch_act.pdf
“CONGRESS MUST TAKE NOTICE — AND ACT!”
My dubiety episodically gets away with me. Our rapacious, embedded Klepto-Kakistocracy effectively owns a depressing proportion of Congress. An observation not intended to imply a fatalistic apathy. I am anything but fatalistic.
If the excessively wealthy paid a fair share to begin with, such gimmicks as a wealth tax would not be necessary. A return to the tax rates which made this country actually a global power in the 1950s would be far better. And eliminating the Trump tax breaks would help.
At any rate, Congress, as it is presently made up, will not pass such legislation either way.
A genuine revolution in thinking and the election of people who care about Citizens would solve many of our economic injustices.
I still place my hope and faith in the younger generations who are suffering the consequences of sanctioned selfishness. A change in the culture is coming.
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I 100% agree with the end goal but I also feel that the uber wealthy will find ways to hide their wealth / tie up the IRS in endless litigation related to calculation of wealth. Effective solutions beyond my pay scale but I think, to start, upping the tax ladder on income, upping capital gains tax, not resetting cost basics of assets to zero upon inheritance … and serious reform of the corporate tax structure (alas, that needs to be an international effort) will start to bend the curve.
Yes, I think we have to also target income and trusts. I think a minimum income tax on any form on income (carried income, goods in kind, trust fund, etc) should be enacted above some fairly high level, along with simplification. With a complex tax code, tax avoidance is easy and the line between it and evasion is hard to audit.
The other thing is to crack down on the abuse of charities and trusts, which is another tough line.
In order to avoid shenanigans you generally need to measure income, assets (wealth), and cash flows, all using the same numbers. This is a good step, but you also need to have some way of taxing beneficial cash flows (which usually count as income, but not always, and it’s those small exceptions that will be exploited).
I know one of the big ways to avoid income taxes by the very wealthy is to not have income, but to take out loans against your assets. This *also* reduces your net wealth, so I could see the way of avoiding this involving taking on huge liabilities to a non-US entity. (Presumably that they have some kind of indirect control or influence on.)
I’m in favor, but there is never just one magic bullet.
No one magic bullet is an important point. Americans have learned to expect victory from one dramatic moment: the magic vaccine, the big bomb, the towering home-run. Doesn’t happen that way. Change is programmatic; it depends on depth of leadership, organization and consistent funding.
Thanks bmaz.
This is the second great idea that I have heard/read about in the last 2 days which could have positive & transformative effects on our democracy . The other was E.J. Dionne & Miles Rapoport discussing universal voting on Al Franken’s podcast.
Hey, don’t thank me, it’s Bob Lords work! All I did was copy it over. It did really look like it fits in with some of Ed Walker’s prior work. And Bob is a good friend, so it was a pretty easy call to put it up.
A good start and the setting of a necessary precedent: there is an amount of wealth that is ruinous to democracy. Taxing it is a necessary condition to preserving democratic governance.
Beyond taxing wealth already accrued, it is necessary to reduce the skewed ways in which it is acquired (not “earned”). I would tax all income at the same rate, for example. No lower rates for capital gains or other forms of income deemed worthier than wage labor. The wealthiest make much of their money through corporations they control. So, no accelerated deductions, certainly not for climate-ruinous fossil fuel companies. The tax and regulatory games big Ag and big pharma play are just as ruinous to the economy, tax revenues, public health, and the economy.
This has nothing to do with socialism, which, btw, the wealthy practice daily, but only amongst themselves. It is an attempt to salvage democratic governance. And we should start implementing these changes while the US remains a favored country and currency through and in which to invest.
Agree 1000%. I’ve thought about that a lot over last 10 years or so, but do not recall seeing it discussed. That distinction alone (acquired vs. earned) would be a fascinating (and I’d bet illuminating) undertaking.
This: “The wealthiest make much of their money through corporations they control.”
Business/corporate taxes need to be replaced, because there are too many legal methods they can use to reduce or eliminate their income taxes.
Fox News legally writing off their settlement with Dominion is a good example that upset a lot of people who apparently are unaware that businesses are allowed to take any and all expenses as a straight deduction off their earnings.
Those gifts from Harlan Crow to Clarence Thomas? They would be capped at a lifetime maximum if they were personal gifts from Harlan to Clarence. There is no gift tax in regards to corporations, though – Harlan’s company provided those gifts. All that’s required is for the company’s top management to approve the expense and for it not to violate any corporate guidelines. Talk about a win-win-win for Harlan and Clarence – it’s a relatively small expense for the business, and he gets to make the gift that reduces his corporate income taxes.
If the Republicans are so gung-ho on replacing all business taxes and personal income tax, let’s see them commit to their principles first and replace corporate incomes taxes with a market access tax. I don’t care about the cost structure or expenses of any of these businesses. They need to pay a tax on their gross sales in the US market. It doesn’t matter where they are located, or what they are selling – this is the tax they need to pay for making money doing business here.
Why does Clarence Thomas not have to pay tax on these enormous gifts? Is it not considered income?
Because America is not a functioning democracy. He should not be permitted to stay on the court, let alone avoid paying taxes, but here we are.
He stays on the court because the Constitution says so. But I guess you do not accept the Constitution. Maybe you should look in the mirror when you yammer about there not being a functioning democracy in the US.
I don’t deny that the Constitution allows it, that is not the point. The Constitution was written by a group of men who naively believed that the checks they put in place would be enough to keep dishonorable people off the court.
Obviously, that is not true. An obviously corrupt justice like Thomas would be removed in a functioning democracy. Our Constitution does not result in a functioning democracy.
And yet another spew of garbage. You don’t like the Constitution so you run your mouth that entire country is bogus. If you are so concerned, what are YOU doing to amend the Constitution. In case you don’t know that take promotion and ratification of states. Go work on that as opposed to grousing here.
In the US, gifts above a certain amount are taxed to the donor. But that opens the door for well-orchestrated abuse by the wealthy, who can have any number of cutouts make the gift, which can obscure the source and the nature of the gift. For profit companies, for example, are not in the gift giving business, and would consider a payment an expense, deductible if possible.
But I agree, it would be more natural if the rules were changed so that gifts above an annual or lifetime max were taxed to the beneficiary at normal income rates. The upper limits really only benefit the wealthy, who have legions of well-informed tax and wealth planners at their disposal.
Until they’re changed, it would be anti-democratic to remove a judge for having accepted a gift. It would be just fine to remove one for serial failure to disclose them or to recuse himself from a case involving anything related to the donor.
” businesses are allowed to take any and all expenses as a straight deduction off their earnings.”
This is one of those things that really never made any sense. If HyperglobalMegacorp can deduct the cost of a CEO’s luxury golfing trips as “customer relations” expenses allegedly necessary for their business – why can’t I deduct the costs of transportation to my wage-job? It is demonstrably more necessary that I arrive at work to earn my living than it is that any particular business expense of a company is to it’s core model.
Taxing the uber wealthy with an annual wealth tax seems reasonable, but I agree with commenters above that the proposed rates seem too low to reverse the concentration of wealth and power. Higher wealth tax rates and reinstating a meanful inheritance tax should help.
WRT inheritances, I also think there should be an effort to help the lower and middle classes build a nest egg to pass on to their heirs.
For example, what about a reform of the Medicare requirement for patients to spend down to poverty level before Medicare will take on the tab for their long-term nursing home care?
Maybe lifting the threshold to cover long-term nursing home care should be triggered when an American has spent down to their last “$1 million dollars” (for lack of a better number. In some crowded parts of this country, $700K is the list price of an average 3-bedroom home). Retired Americans, who worked and saved their whole lives, might then be able to enter nursing home care when no longer able to live safely on their own and still leave something for their heirs. If this is too expensive then maybe institute a free system for aging Americans to receive expert estate planning to move their assets into irrevocable trusts 5 years or more before they are likely to need nursing home care.
I also wonder about the loss in income tax revenue if AI and labor saving machines continue taking jobs away from humans. What if AI was no longer working for free but earning a salary based on what used to be human wages for the same amount of work done?
With an estimate of AI wages, why not then calculate an “income” tax due for those (likely unpaid by the owners of AI) wages each year?
Aferall the government is going to need some form of cash inflow to cover the anticipated universal income in the future when work is no longer available to humans to cover living expenses.
Note how the reactionary right goes after abortion: go low, states’ rights and all that, but aim high, an unspoken de facto national ban. Start by setting the precedent and legality of a national tax. Adjust it frequently by assessing how well it’s administered and meets stated goals, and to respond to the legal and political avoidance schemes played by the wealthy.
The race to preserve democracy is a marathon, not a sprint. Like the supposedly non-existent class warfare in the US, only the wealthy have been fighting this battle for some time, and so far, they’re winning.
Yes, an iterative process in the right direction would be fine by me if the initial set point would be too high a bar to clear out of the gates.
Many thanks for sharing this bmaz.
As a retired Investment Management Exec. this topic is near and dear to my heart.
When polled Americans consistently and GROSSLY underestimate ACTUAL Levels of Wealth and Income Inequality. The magnitude of the problem in a Country lacking effective Campaign Finance Regulation that also Legally equates Corporate and Individual speech can hardly be overstated.
Given current levels of Income and Wealth Inequality a new Wealth Tax is indeed necessary.
However, it is important to recognize the enormous impact that the reduction in the number of Tax Brackets (in the 1980’s under the deceitful auspices of “Tax Code Simplification”) and seriously Lax Non-Cash Compensation Tax Law have had on increasing Inequality.
Reforming both can yield enormous benefits going forward.
The ease with which an ostensibly wealthy figure like Trump tapped into the nascent disaffection and anger of Americans who’ve experienced slowly rising Insecurity and accelerating change, but who mostly don’t understand “how the game is really played” is predictable, tragic and seriously DANGEROUS.
I’m all for wealth taxing, but I think the lawful evil response to this would be to drive the poor and middle class into negative wealth so the average household wealth is zero, negating the tax completely.
Also, is there a civil law equivalent to a bill of attainder? you’re getting close to being able to list the ones impacted on a 3×5 card using large print.
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Brilliant! Thank you Mr. Lord! This is a fiscal way of addressing some of the shortcomings of the legislative process in this country. Legislative capture and sheer tribalism have resulted in gross misallocation of resoiurces to unworthy societal goals, in my opinion. Like gigantic tax cuts to the rich and building walls that prevent nothing. The Citizens United decision by SCOTUS also opened the spigot for a firehose of dirty, unregulated money that thoroughly corrupted the national electoral process and gave us Donald Trump!
is a wealth tax constitutional? not same as income tax.
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Sorry no one responded to you. Article I, Section 8 of the US Constitution says Congress has the power to levy taxes, so it’s not a question of whether Congress can institute another tax.
The Fifth Amendment says private property can’t be taken without due process nor for public use without just compensation. I assume this is where you’re having a problem. It could be argued that the property isn’t truly private having been accrued by unfair advantage, ex. persons paid minimum wage which is not a living wage having contributed to profits which create wealth accrued as private property. It could also be argued that property is a shelter for income which wasn’t fairly taxed.
I’m sure there are better arguments out there if others are willing to take a stab at this. You, though, being outside the US, likely don’t have this question to worry about unless you’re sheltering wealth in the US.
Am not sure of this, but I “think” Congress could do it via reconciliation.
Good article, and there are wealth taxes in some juridictions internationally. The practical problems should not be glossed over and I do think there are serious concerns about constitutionality, well explained in this Harward Law article: https://hls.harvard.edu/today/does-the-constitution-allow-a-billionaire-tax/
One other positive side-effect of a wealth tax would be to disincentive holding of assets for the purposes of price speculation.
Blog,
It’s valuable to note the differences between wealth and income. Inequality in wealth is arguably more impactful than inequality in income.
Wealth is a slippery concept. As an example, consider an imaginary purchase of a Picasso on 1900. Now imagine it’s stayed on your grandmother’s wall for nearly a century. (She is the daughter of the purchaser.) it’s clearly worth more than the number on the bill of sale, but how much more? Now let’s argue about the worth of a bunch of real estate parcels!
I don’t say this to say a wealth tax is a bad idea, but we do need to at least nod at its difficulties.
Datnotdat
We already have a wealth tax on real estate, at least here in California; it’s called “Property Tax”.
LOL. California has a non-wealth tax on real estate. Some of the most expensive real estate in the world pays a pittance in property tax, and has done since Prop 13 passed in 1978 – long before the steep rises in property values of the past half century.
Warren Buffett once said he paid more in real estate tax on his relatively modest home in Omaha than he did for a coastal California mansion. If you want a wealth tax in California, repeal Prop 13.
LOL okay, sure, that 1% cap thanks to 1978 Proposition 13 is such a massive burden on the wealthy.
I generally agree with the article, though I take issue with one premise. Oligarchy has not “arrived”. It has been here all along, just because it was a term we only previously used for official state enemies and third world countries doesn’t mean that it didn’t apply the the various corrupt elites who exercise outsized influence in our own society.
I also don’t believe that taxes alone will present any kind of a solution. We have allowed our financial systems to be corrupted and filled up with fictional ‘legal persons’ which are used to obscure actual ownership/control of the various engines of capital. The tangled nets of these corporations and other structures exist almost entirely to allow the wealthy and well-informed to escape their tax and other legal obligations.
We need to take a step back and reevaluate the ostensible purpose for which we have allowed these structures to exist. Nobody has an inherent right to form or own a corporation to escape personal liability for the costs of the decisions taken by that business. This is a privilege that the state offers to these investors because it is believed that certain kinds of business would not be undertaken if the investors had to accept personal liability for negative outcomes. Accepting arguendo that this is the case, it does not follow that that fictional legal person should be allowed to form and own corporations so that *it* can escape the consequences of *its* bad decisions. Liability protection should not go more than one layer deep. Nor should ownership.
This would not be a terribly difficult thing for the US to implement, simply pass a set of laws and rules that prohibits fictional legal persons from owning any parts of other fictional legal persons (I would also extend this to ownership of real property). All owners of a fictional legal person/corporation/trust/etc must be individually named and contactable by the state. Offshore owners can continue to exist, so long as they are individual actual owners, no trusts or corporations allowed. Give the owners of these structures a fixed period to untangle their webs – say two years. After that point, instantly, any non-person owner of a US legal structure or piece of real property is expropriated – any actual person who is harmed by this can apply for compensation, in person, in the US, if they present actual proof of ownership.
One of the major benefits to dismantling the byzantine structures of offshore tax-haven ownership is that it would cripple the financing networks of both Terrorist organizations as well as international drug-trafficking organizations. The only reason that this hasn’t been done already is that the same mechanisms that allow the Cartels to launder their money are the ones that allow our Oligarchs to do so. They will resist any substantial changes to the system that might alter this status quo.
In history has there ever been a situation where massively concentrated power (including wealth) has been redistributed with long term success without substantial violence or major economic strife?
Interestingly, in Britain between 1920 and 1990. Yes, I know these was a world war and a great depression in there, but those were global events.
https://ifs.org.uk/inequality/wp-content/uploads/2021/11/IFS-Deaton-Review-The-history-of-inequality-1.pdf
The reasons are complex and not altogether obvious. I do not claim to fully understand them, so I have let my over-confident assistant ChatGPT bot-splain them in an over-simplfied manner below. ChatGPT attributes it to an outbreak of public policy initiative which would give Republicans a mild stroke.
“Wealth inequality in Britain decreased between 1920 and 1990 due to a combination of economic, social, and political factors. It’s important to note that this period saw significant shifts in the distribution of wealth, and while inequality decreased overall, it did not disappear entirely.
Here are some key factors that contributed to the reduction in wealth inequality during this time frame:
1. Economic Growth: Britain experienced periods of strong economic growth during this period, particularly after World War II. This growth benefited a wide range of people, leading to rising incomes and improved living standards for many.
2. Progressive Taxation: The British government implemented progressive tax policies, which meant that higher-income individuals paid a larger share of their income in taxes. This helped redistribute wealth from the rich to the poor and reduce wealth inequality.
3. Welfare State: The establishment and expansion of the welfare state in Britain played a significant role in reducing wealth inequality. Social programs, such as the National Health Service (NHS) and unemployment benefits, provided a safety net for those in need and reduced poverty.
4. Labor Market Reforms: Labor market reforms, including the expansion of labor unions and collective bargaining, helped improve wages and working conditions for many workers. This contributed to a more equitable distribution of income.
5. Education and Skill Development: Investments in education and skill development programs allowed individuals to access better job opportunities and increase their earning potential, narrowing the income gap.
6. Inheritance Taxation: The British government also introduced and periodically adjusted inheritance tax policies, which affected the intergenerational transfer of wealth. Higher inheritance taxes reduced the concentration of wealth among a few families.
7. Social Mobility: Efforts to promote social mobility, such as access to higher education and career advancement opportunities, allowed people from lower-income backgrounds to move up the economic ladder, reducing wealth inequality.
8. Global Trends: The global economy and the aftermath of World War II contributed to a more equitable distribution of wealth in many Western countries, including Britain, as governments focused on rebuilding and creating social safety nets.
It’s important to note that while wealth inequality decreased during this period, it did not disappear completely, and there were still disparities in wealth distribution. Additionally, wealth inequality trends can be influenced by various factors, including changes in economic conditions, government policies, and societal norms. Therefore, the specific reasons for wealth inequality changes may vary over time and require a more detailed analysis of historical data.”
Happy to read your thoughts, without the chatgpt stuff.
You need to adjust your dates. The cited improvements owe their existence to post-war Labour govts, and a rising global economic tide. But the sharing the wealth part is Labour’s doing. Their ideas were so popular – the NHS, industrial and education reforms, for example – that long-serving Tory govts of the fifties were unable to reject them and return to the status quo ante. Like reactionaries in the US, who are still trying to undo FDR’s reforms, Tories are still trying to privatize medical care and undo other reforms.
Labour got there not just because of reaction to WWII. Its Great Depression started earlier and lasted longer than in the US. People were fed up with being ignored by a govt that catered to the most concentrated landed wealth in Europe. Despite winning the war, they rejected Churchill and his Tories, and voted in the guy and the party that made govt run while Churchill ran the war – Clement Attlee and the Labour Party.
I think a lot of it was to do with lifting up the poor working class, through access to education and removing barriers to social mobility. The decline of Victorian England and the shift from rural to industrialised urban lifestyles definitely played a part. The rich inheritors were allowed to fail and squander their wealth. Progressive taxation also acted as a real brake on wealth accumulation at the top end of the spectrum.
There is a remarkable book by Jeffrey A. Winters titled Oligarchy. It is probably the best on the subject being discussed above, especially in how we have created a civil oligarchy of wealth and how difficult it is to put the genie back in the bottle.
My favorite idea would be to change fixed fee fines to percentages of income. Instead of a handicap parking fine being $500, make it 1% of income. For a median income, it stays about the same, while for a millionaire, it becomes $10,000, maybe enough for them to notice, as opposed to change from their cushions.
Imagine if, instead of a fixed fine, for each violation of a customer’s privacy, instead of paying an FTC fine of $100,000, a corporation had to pay 1% of gross income?
Finland has done this for years. There are still caps in place of course, but it was a major news story over there when a particularly rich individual committed an egregious but non-criminal moving violation and got hit with a six-figure ticket because of the calculations. But in Finland the ticket is INSTANTLY assessed because every LEO in that country has immediate access to a nationally centralized taxpayer database that can be used for that purpose, and instances of fraudulent identity or failure to appear in the database are rare (and end up resulting in a bit different exchange on the side of the road). A different context than here.
But your point holds. There is a Planet Money podcast about a guy who sells truffles out of a van when they’re in-season. He had a budget item for tickets from parking violations because he came out ahead stopping right outside a restaurant and grabbing the chef right at opening. It was surreal hearing an explicit cost-benefit analysis that resulted in it making little sense to follow the law.
I like this but for the mighty minority this is a fight to the death with their lopsided advantage in asymmetrical legislative warfare.
For decades already, the fascist catalyst oligarchy has owned and operated the country, the congress, and now much of the judiciary, including scotus’ political hacks in robes whose nominations were financed by $10Ms
The hyper wealthy oligarchy is now in possession of such power that it cannot be challenged by citizens
The feckless Democrats have allowed this situation to develop over the decades because they too are corrupted by oligarchy’s money.
Let’s assume the Democrats take control of the house and the senate and maintain the White House
None of the proposed solutions above have a chance of being implemented, never mind being proposed.
Two books were written that showed that Congress implements the preferences of the big donor class, the oligarchy, 90% of the time, and the citizens preferences 10% are less of the time, and only if the citizens preferences do not diminish the power and wealth of the big donor oligarchy
I say the situation in America, degrading into fascism, is hopeless.
For years I’ve been asking for practical, actionable plans to stop and reverse this tendency
All I get is crickets
And, yet, here you are spewing bullshit. Try to do better for you second whole comment.
Your practical, actionable tactics are what?
Seeing as you have none cognizable, my intent is to not see the blundered Trump Derangement forever alter the face of criminal law in the US.
So, WTF is “your” agenda? nor, you can just continue to blithely scream codewords like “Fascist” and other baloney. See you on the backside.
All you get is crickets? Try a Jimmy Buffett song, maybe, Changes in Latitudes, Changes in Attitudes.
Thank you. I’ve got one brother who thinks Antifa was setting fires in Oregon & another brother who thinks Kamala Harris looks vaguely satanic. Given their capture by right wing media, it just feels like it’ll be real hard to get a sensible message across that can persuade enough Americians to get something like this passed.
I am sorry to seem pessimistic but I have to place this scheme into the Sasquatch and Nessie category- even if workable would require Democratic super majorities in both houses of congress and a sympathetic Democratic president to even have a chance. Ain’t gonna happen anytime soon. The problem is real; the solution will take decades.
Money doesn’t talk, it swears.
From the Guardian: https://www.theguardian.com/us-news/2023/sep/05/texas-fracking-billionaire-brothers-prageru-daily-wire
Texas fracking billionaire brothers fuel rightwing media with millions of dollars
Farris and Dan Wilks’ deep pockets fund climate denialism education, conservative politicians and pro-fossil fuel projects
Two billionaire Texas brothers whose fortunes derive from oil and gas fracking have pumped millions of dollars into rightwing media outfits that have promoted climate-crisis denialism and sent more big checks to back an array of evangelical projects and conservative Texas politicians.
The fracking billionaires Farris and Dan Wilks have each doled out millions of dollars through separate foundations over the last decade to a number of high-profile conservative and religious groups including the Heritage Foundation, Family Research Council and Focus on the Family…
…The Wilks brothers, for instance, have poured millions of dollars into PragerU and the Daily Wire, two rightwing media outlets that have promoted wide-ranging conservative agendas, including climate crisis denialism to school-age kids and adults via short videos, articles and other materials.
The two brothers have given at least $8m to PragerU, which is unaccredited, according to Texas financial records. In July, Florida approved the use of what PragerU has called its “edutainment” videos and other materials for use in its classrooms, and PragerU has said it is trying to get other states, including Texas, to do likewise.
Based on Termagant tables i’d guess that level of taxation would not reduce inequality, put substantial money back into the government to repurpose, nor reduce the influence of the ultra rich. Net wealth going from $100 billion to $95 billion is not reducing inequality or reducing their ability to influence pretty much everything. As we found out during the pandemic and with support for Ukraine the U.S. govt. can add billions or trillions to spend as needed at almost any time. So the few billion from these taxes are a negligible amount in the bigger picture. And then there is the political problem of trying to redistribute it to those most in need.
I’d be more interested in someone gaming out the generational effect of severely taxing inheritance. How would it effect inequality to have laws that only allow inheritance of a maximum of say $10 million of all a persons wealth including all capital, property, ownerships stakes etc. The oligarchy is largely perpetuated by inheritance.
As many have posted, a wealth tax may not fly. But taxing all income, including investment income, could have the same impact. WA state imposed a capital gains tax on all gains over $250k, I think. If memory serves they brought in $1 billion(?), 4-5x more than predicted. From people who can easily afford it. All of this money will go to schools and universities. A federal tax could be similarly structured.
Two quick points:
When looked at through the lens of climate crisis, the situation is even more dire. Instead of committing their wealth to mitigating its effects, they’re buying hidey holes in New Zealand. The would clearly rather remain lords over a diminished world than lose a fraction of their position. This problem will not be solved while we have such wealth inequality.
Second, my brother, who helps the wealthy hide their wealth, always answers that the wealthy will just hide their wealth. But, as systemic risks to our democracy, I think it’s fair for them to have more reporting requirements. Larger banks do. Make them inventory and declare their wealth. They can afford it.
@bmaz, It’s been a long time since you suggested a subwoofer, and a long time since I got one, but I wanted to mention that while I expected a fuller sound, I did not expect the significant increase in the depth of field of the stereo image. Nice!
@Rayne: I don’t often comment, but have almost always used this name. There was a brief period when I added a “1”, but that was because I couldn’t count to 8. Hope it’s ok to revert.
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Interesting idea, but we’d still have ‘taxation without [fair] representation.’ Until we use the population of the smallest US state as the denominator in ascertaining the number of US House seats per state, and give a fair hearing to desires of US territories (DC and Puerto Rico, for example) about whether and when they might desire statehood, we still have the powerful and the powerless; and the perpetual inequality caused by disproportionate apportionment.
The Founders intended the US Senate to be a larger voice for smaller states, not the House. My idea, which I don’t see discussed anywhere, but at my dinner table, wouldn’t take a constitutional amendment. It would take the public’s heightened awareness of this secret inequity, the money and advocacy of an Ed Blum-like character, and additional Congressional office space in DC for an evolving number of House seats to EVENTUALLY vary between 589 to 609 at its LARGEST, no matter how large the US population gets, according to my calculations. And, THIS ALONE, would quell some of the impact of gerrymandering, and, if enacted within this decade, the current balance of blue to red House seats, would stay essentially the same.
Money, or access to capitol, is not the only inequality that has worsened since the guilded age. The decision in the progressive era that followed, to cap the number of seats in the House of Representatives at 435, has exacerbated inequality as well.
…not to mention the sins of my home county, Shelby Co., Alabama…. but that’s another story…I’ve got a court order to read when I get home tonight. I think we got a court special master who’s going to be drawing our new voting maps…..