Maybe you were surprised when Elizabeth Warren proposed taxing wealth in the U.S. at 2% if you held over $50 million in assets (3% if you held over one billion dollars in assets). Representative Ocasio-Cortez proposed hiking the top income tax rate to 70%. (That rate is low by comparison with the rate during the Second World War when the top rate was 94%). Why, you might ask, should taxes be so high? But really, they aren’t too high.
How much wealth is there in the United States, anyway? In the second quarter of 2018, all the households of the U.S. together had $106.9 trillion. That’s $106,900,000,000,000.00). How many households are there? In 2018, there were 127.59 million. So if the wealth were evenly divided (which it isn’t), each household would have $837,939.96.
Let’s suppose that each household paid $100,000 over to the government. That would leave every household with $737,939.96. Not too shabby. The government would then have $12.759 trillion. How much does the federal government spend in a year? $4.407 trillion. It is “guesstimated” that all federal, state, and local governments will spend less than $8 trillion together in 2019. A wealth donation would eliminate the need for income tax for at least a year and reduce the federal debt by $4 trillion.
The real problem is that the assets are not shared equally, so the taxes would need to fall mostly on the wealthy, as they have most of the assets. Currently, the top 1% in the U.S. hold 38% of the wealth. The top 1% of the households would be 1.2759 million households. 38% of $106.9 trillion is $40.622 trillion. Dividing that amount among 1.2759 million households would give $31,837,918 to each of those top households. If we taxed each of those households $10 million (leaving each with over $21 million) the governments would receive $12.759 trillion. In other words, the top 1% could pay all federal government expenditures for three years and still have over $21 million each. And no one else would have to pay any taxes.
To me, this means that wealth is very poorly distributed, and the government could be spending a lot more if the wealthy were paying their fair share of the national wealth.
Let’s suppose the government got an extra $12.729 trillion from this wealth tax? What could it spend it on? The total federal debt was $21.46 trillion in 2018. We could take that $12.79 trillion from the top 1% of households and bring the total debt to under $9 trillion. How’s that?
Or we could wipe out all student debt. That’s only $1.4 trillion. A mere bagatelle. The government would still have $11.39 trillion for other projects.
We could repair the crumbling infrastructure. That would $4.6 trillion. We’d still have $6.79 trillion.
How about paying for Medicare for all? There’s a lot of arguing – with one side saying such a program would cost $32 trillion over 10 years and the other saying it would save $2 trillion over 10 years. Well, why not but up $6.79 trillion and find out. If the conservatives were right, we’d still pay for two years of Medicare for all out of the wealth tax, and if the progressives were right, we’d keep the $6.79 trillion and get another $2 to boot.
This wealth tax looks like a very good thing. Repair the infrastructure, wipe out the student debt, and get single-payer healthcare well established. And all just by taxing a bunch of uber-wealthy.