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A modern wealth tax can overcome these three weaknesses. First, offshore tax evasion can be fought more effectively today than in the past, thanks to recent breakthrough in cross-border information exchange, and wealth taxes could be applied to expatriates (for at least some years), mitigating concerns about tax competition. The United States, moreoever, has a citizenshipbased tax system, making it much less vulnerable than other countries to mobility threats. Second, a comprehensive wealth tax base with a high exemption threshold and no preferential treatment for any asset classes can dramatically reduce avoidance possibilities. Third, leveraging modern information technology, it is possible for tax authorities to collect data on the marketvalue of most forms of household wealth and use this information to pre-populate wealth tax returns, reducing evasion possibilities to a minimum. We also discuss how missing market values could be obtained by creating markets. In brief, the specific way in which wealth was taxed in a number of European countries is not the only possible way and it is possible to do much better today.

The standard and broadest measure of household wealth includes all financial and non-financial assets valued at their prevailing market prices, net of debts. Assets include all property that is marketable or, even if not directly marketable, whose underlying assets are marketable.5 Financial assets include fixed-claimed assets (checking and saving accounts, bonds, loans, and other interest-generating assets), corporate equity (shares in corporations), and non-corporate equity (shares in non-corporate businesses, for instance shares in a partnership). Financial assets can be held either directly or indirectly through mutual funds, pension funds, insurance companies, and trusts. Non-financial assets include real estate, i.e., land and buildings.6 Debts primarily include mortgage housing debt, consumer credit (such as auto-loans and credit card debt), and student debt. Assets owned by businesses, such as a headquarter building or a patent, contribute to household wealth through their effect on share prices. Net wealth does not include “human capital” such as future wages and pension rights that have not yet been accrued.7 Wealth also excludes the present value of future government transfers (such as future Social Security benefits or health benefits), which is not marketable.

Though the last Democratic debate did not yield any revelations, the aftermath has been a focus on America’s financial state, with discussions of a wealth tax (championed by Sen. Elizabeth Warren and Sen. Bernie Sanders) and universal basic income (championed by Andrew Yang) receiving the lion’s share of attention.

Cue a handful of CEOs writing op-eds claiming that a wealth tax would never work.

In addition to lowering the federal corporate net income tax rate dramatically, the TCJA provided immediate expensing benefits and substantial accelerated depreciation.213 Although simply a timing issue at the federal level, there are serious revenue implications at the state level, to the extent the state conforms.214 In the case of unincorporated businesses, the individual taxpayers could receive the benefit of full deductions immediately and then subsequently relocate. Unlike at the federal level, the departure state would not have the ability to tax the outsized income that is derived from the capital expenditures in future years. Any resultant income would be sourced to the state that generated the income or the individual’s new state of residence, even though the departure state allowed the individual a substantial deduction when they were a resident. In addition, if the asset is sold, the departure state would also forgo any depreciation recapture. The tax deficit related to this timing disjunction is nominal compared to the other situations described above, but it illustrates the compounding effect of states losing the ability to tax income that accrued within their taxing jurisdiction. The detriment is magnified because of the timing aspect: the state is not only giving a deduction against non-existent future income, but the state is granting the deduction immediately, so the state’s revenue is further eroded by the time value of money.

The migration dynamics are quite different at the subnational level, which partially explains why state and local jurisdictions have not yet embraced exit taxes. Most obviously, migration within the United States does not implicate thorny citizenship issues. As such, state and local exit taxes would not serve a patriotic deterrence function.14 States may also be concerned about signaling hostility toward high-net-worth individuals and businesses, which would be counterproductive to attracting and retaining those taxpayers.15 Because interstate migration is much easier than renouncing national citizenship, taxpayers are more likely to respond to unfavorable state tax policy by leaving the state. State policymakers must also consider the complex constitutional limitations on state taxation. Exit taxes implicate the fundamental right to travel under the Privileges and Immunities Clause, a constraint with which most state tax policymakers have little experience.16 But perhaps the most likely reason why states have not embraced exit taxes is that, from a tax perspective, migration was approximately net neutral.17 If a state exit tax would not generate substantial revenue above the status quo, there is simply no point.18

Finally, states must consider how to label the exit tax and if it should be a standalone tax regime. This seemingly trivial consideration can have an enormous impact on the practical viability of the exit tax, particularly given the pejorative nature of the term itself. There is already political resistance, including a proposed federal bill that would preempt states from imposing an exit tax.249 States can label the tax as a continuation tax, a benefit tax, trailing nexus, or simply not label it all. The exit tax would generally not be a standalone regime but would instead be an integral component of the state’s existing personal income tax regime.250 And if a state adopted a pure continuation tax approach, there would not be any new imposition of tax, just a new annual reporting obligation.

The anti-discrimination prong is most relevant to state and local exit taxes. Exit taxes implicate the anti-discrimination prong because they apply only to taxpayers engaged in interstate activities—i.e., individuals moving from one state to another—and not to taxpayers engaged solely in intrastate activities. If a state tax law has a discriminatory impact on interstate commerce, the United States Supreme Court will generally invalidate the law without balancing the competing state interests.139

Despite compelling justifications for state and local exit taxes, they face several potential constitutional hurdles. State and local exit taxes may implicate several clauses of the United States Constitution and the respective state constitution. Taxing authorities may also face federal preemption, as a recently proposed federal bill would preclude all state and local exit taxes.106 As a practical matter, however, it can be difficult to invalidate a state tax statute on constitutional grounds. State and local tax disputes must generally be litigated in the respective state court system pursuant to the federal Tax Injunction Act.107 State court judges may be less comfortable analyzing federal constitutional issues, and most states’ tax trial courts are administrative bodies, many of which do not have jurisdiction to decide constitutional questions.10

To mitigate tax base migration, many nations have implemented national level exit taxes.62 The United States federal level exit tax applies when a United States citizen renounces their citizenship.63 In such a case, the United States would lose the jurisdiction to tax the individual if the individual renounced their citizenship and became a resident of a different nation. Absent the exit tax, a technology company founder with billions worth of stock, for example, could renounce their citizenship and change their residence to the Cayman Islands. If they then sold their stock, the United States would lose the ability to tax the gain, and the individual may pay no tax depending on their new residence nation. To prevent this tax base migration, the United States exit tax considers the citizenship renouncement a realization event.64 Thus, the individual must pay tax to the United States based on their overall accrued wealth up to the point of renouncing their citizenship.65 The current United States exit tax regime became effective in 2008 and replaced a widely criticized continuation tax regime that did not impose an immediate deemed realization but instead tracked the expatriate’s property transactions for ten years after their expatriation.66

A well-enforced wealth tax would reduce wealth concentration. That seems to be a consensus view among economists: In the IGM poll on wealth taxes, 73% of economists agreed and only 12% disagreed with such a statement (results weighted by self-reported expertise).70 The reason is simple: if the rich have to pay a percentage of their wealth in taxes each year, it makes it harder for them to maintain or grow their wealth. Changes in consumption vs. saving decisions can exacerbate this effect: with a wealth tax, wealthy taxpayers may decide to spend more today and save less (this is the substitution effect: consuming now rather than later becomes relatively cheaper). Changes in consumption vs. saving decisions could conversely dampen this effect if the wealthy decide to spend less to preserve their wealth (this is the wealth effect, as the wealth tax reduces economic resources of the taxpayer). In any case, the wealth of people subject to the tax is expected to rise less fast after the introduction of the wealth tax than before. There is relatively little empirical work evaluating whether a progressive wealth tax can reduce wealth concentration. One recent exception is Jakobsen et al. (2019) who exploit compelling identification variation with the Danish wealth tax and find that the long-run elasticity of wealth with respect to the net-of-tax return is size-able at the top of distribution.

For decades, the rich and powerful have taken advantage of the United States economic system, yielding extreme concentration of wealth at the very top and producing off-kilter, dysfunctional economic outcomes. Since the 1970s, the top 0.1 percent of US households have dramatically increased their wealth share from 7 to 20 percent, while the bottom 90 percent have seen their wealth share plummet to 25 percent.

One of the most effective ways to rectify these economic distortions and inject fairness into the US tax code: a wealth tax.

What can we conclude from our analysis about the prospects for progressive wealth taxation in the United States?

First, the wealth tax is likely to be the most direct and powerful tool to restore tax progressivity at the very top of the distribution. The greatest injustice of the US tax system today is its regressivity at the very top: billionaires in the top 400 pay less (relative to their true economic incomes) than the middle class. This regressivity is the consequence of the erosion of the corporate and estate taxes, and the fact that the richest can escape the income tax by reporting only half of their true economic incomes on their individual income tax returns. A wealth tax with a high exemption threshold specifically targets the richest and could resolve this injustice. Second, our analysis shows that the wealth tax has great revenue and wealth equalizing potential in the US context. Household wealth has grown very large in aggregate (5 years of national income in 2018) and the rich own a growing fraction of it (20% is owned by the top .1% of families). The wealth tax, if the tax rates are high enough, is also a powerful tool to deconcentrate wealth. Wealth among the Forbes 400 has grown about 4.5 percentage points faster annually than average since 1982. A wealth tax of 2 or 3% per year can put a significant dent into this growth rate advantage. With successful enforcement, a wealth tax has to deliver either revenue or de-concentrate wealth.79 Set the rates low (1%) and you get revenue in perpetuity but little (or very slow) de-concentration. Set the rates medium (2-3%) and you get revenue for quite a while and de-concentration eventually. Set the rates high (significantly above 3%) and you get de-concentration fast but revenue does not last long. Which is best will depend of course on ones political views. Can a wealth tax be successfully enforced? Our review of past and foreign experiences, as well as recent empirical work tells us that enforcement is a policy choice. We certainly have plenty of evidence showing that a poorly designed wealth tax generates a lot of avoidance and little revenue. But we also learn lessons about to design a wealth tax well. Cracking down on offshore tax evasion, as the US has started doing with FATCA, is crucial. Taxing expatriates as the US currently does is also very important to prevent the mobile wealthy from avoiding the tax. Third, systematic reporting of wealth balances (instead of relying on self-assessments as for the estate tax) is a necessary condition for good enforcement (as is amply demonstrated in the income tax context). Finally, the issue of valuation of closely held businesses is key for the integrity of the wealth tax. Our view is that the government has to create the currently missing (or highly private) markets for equity of large closely held businesses. It is often the case that accounting rules develop in synergy with the tax system

Given this, in terms of social justice alone, there seems to be a strong case for a move towards a more equal distribution of the ownership of wealth, particularly among the young. But why not simply do this by the traditional route of taxation – inheritance taxes, a lifetime capital receipts tax (to capture gifts as well as inheritances), as advocated by Atkinson [7], or a straightforward tax on wealth? Certainly, some type of wealth taxation should form part of any strategy for redistribution, and indeed most UBC advocates have suggested financing the UBC through that route. The introduction of a more effective tax regime could alone do much to remedy the inequality of inherited wealth, by lowering the amounts given in the top quintiles. However, simply to rely upon taxation would mean missing a key benefit of the UBC – one that may constitute as important an argument for the policy as the rectification of social injustice.

This benefit arises from the impact that a UBC can have on the life-time of the individuals themselves, and not only the recipients of their eventual wealth. Evidence from longitudinal studies in Britain show that young adults’ ownership of financial assets has a significant impact on their subsequent lives and livelihoods. The simple fact of possessing assets at 23 has been shown to improve young people’s prospects, in terms of employment, earnings and health, at the ages of 33 and 42. Nor is this likely to be mere correlation, with the relationships remaining even when controlling for confounding factors, such as income, class, and personality type [17, 18].

Turning to the issue of adequacy, an essential element of the right to social security and directly linked to the realisation of other rights to livelihood, health care and social protection, a basic income payment would have to be of an adequate size to provide enough to enable people to make choices about their lives and give them access to the full range of human rights to which they are entitled. It would have to meet both individual and family needs, regardless of the nature of the family, of particular importance in the case of sole parent families. A minimalist basic income that did not provide an adequate livelihood would violate human rights and would deny women the means to overcome their structural disadvantage. It would also do little to address their unequal status or subvert gendered patterns of work and care. A basic income would need to transcend minimalist logics and be redistributive to contribute to far-reaching social and economic equality. In order to be substantively gender equal it would have to be designed with women in mind (and with their involvement) to ensure that it is appropriate, adequate and complemented by other social protection measures that contribute to transforming gender relations in society. Of course, affordability is frequently raised as a concern in basic income debates, particularly in the Global South. Human rights underpinned by substantive equality would expect these social protection challenges to be addressed within the context of tax, debt and other restructuring measures at local and global levels, including by way of international cooperation. To be transformative a basic income would require far-reaching enabling and complementary measures to realise human rights. On its own a basic income would not necessarily overcome economic inequality. For it to contribute to transformative, redistributive outcomes, it would have to be accompanied by other forms of economic restructuring. Similarly, if substantive gender equality is to be achieved, an adequate basic income would not on its own be enough to unravel patriarchal relations.

The fact that on most models basic income is provided by the state to individuals within its boundaries raises some issues for the eligibility of non-citizens and residents of different statuses and again there are differing views on this.42 Some models propose a basic income for adults with a smaller grant for children.43 A strong argument for a basic income is that the absence of means testing and conditions such as work-seeking or being in employment reduces bureaucracy and saves administrative costs. This is quite a radical idea, particularly in the neo-liberal era where income support has become increasingly constrained under conditions of austerity and is often tied to meeting conditions to prove that the applicant is ‘deserving’. The idea of a basic income raises challenging philosophical questions about how we understand our obligations to each other and view the social contract, including how we understand individual decisions about paid and unpaid work. One of the arguments for a basic income is that it expands individual freedom to pursue meaningful activities that are not income-generating or are lower paid. The idea also raises economic questions about levels of taxation, affordability, the retention or removal of existing income support and other social welfare schemes, and the likely impact of a basic income on the economy. Various proposals suggest a tax claw-back from the wealthy which also addresses concerns about the seeming unfairness of a payment provided to rich and poor alike. One of the sub-issues within the basic income debate relates to the potential environmental benefits. A basic income is seen as a means of slowing down the exponential and unsustainable model of economic growth that currently animates our capitalist system by allowing people to consume less and work in ways that use less resources.44 In addition to issues of sustainability, the recent interest in a basic income is generated by specific concerns about growing economic inequality and the changing nature of work. As evidence of this inequality, Oxfam has noted the increasing concentration of wealth in the hands of a small group of billionaires. In 2018, 26 people owned the same amount of wealth as the 3.8 billion people who comprise the poorest half of the world’s population – in 2017, this figure was 43 people.45 Few countries seem willing or able to tax the global companies that generate this wealth. While inequality is growing the rate of reduction of extreme poverty had slowed by half since 2013 according to the World Bank.46 The Bank is now projecting that the economic impacts of COVID-19 will result in ‘the first increase in global extreme poverty since 1998, effectively wiping out progress made since 2017’. 47 Inequality has severe consequences for political and economic stability, health and the environment.48 This inequality manifests in many parts of the world in underemployment and salary stagnation. Precarious labour conditions are a reality for millions within the increasingly global labour market. There are fears about the loss of jobs in what has been labelled the ‘Fourth Industrial Revolution’ which entails changes in scale and scope that cannot yet be predicted, including via robotics, artificial intelligence, biotechnology, the ‘internet of things’ and quantum computing. 49 These technologies are likely to reduce employment in many areas with some uncertainty about whether new forms of income generating work will arise to replace the old jobs or whether many people will become unemployed or underemployed leading to even greater inequality and insecurity. It is these concerns about both a crisis in work and the related challenges of inequality that have led to calls for a basic income from a range of quarters. A basic income is being seen variously as ‘venture capital for the poor’, a response to poverty and austerity, and as a means of freeing people to work as they choose rather than remain in meaningless, unsatisfying ‘bullshit jobs’.50

Finally, policymakers can consider adopting progressive tax policies to fund social programs. A wealth tax, for example, can be used to improve access to health care, housing, and job training. Such an approach can achieve multiple goals, such as increasing the disposable income of families and individuals, decoupling the role of income in accessing health-promoting resources, and reducing the magnitude of income inequality, which, as we pointed out, is independently associated with negative health outcomes. Other policies gaining popularity and acceptance are guaranteed income programs such as universal basic income and negative income taxes, which could replace or supplement current means-tested safety net and antipoverty programs.29 These redistributive policies would increase the role of government in reducing inequality, which helped narrow inequality in the United States and elsewhere in the early to mid-20th century.

The coronavirus pandemic has shown just how deeply rooted inequality is in the United States. While tens of millions of Americans have lost their jobs, billionaires in the United States have increased their wealth by a staggering $685 billion since mid-March. Among the major winners are Elon Musk, who just became the world’s fourth richest person, and Jeff Bezos, the world’s richest person, whose wealth has bloomed to more than $200 billion.

Unfortunately, those at the bottom are disproportionately people of color. Indeed, the first step to reducing racial inequality in America is to find a way to reduce economic inequality — which means getting more money into the hands of those who need it most.

The rich may argue that the wealth tax is a form of double taxation, as they have already paid income taxes on the wealth they have accumulated. Table 1 suggests they may have already paid some taxes, but not nearly the appropriate taxes they should have relative to their fellow citizens. The wealthy may try to claim that the 3 percent wealth tax is discriminatory as it singles out only certain families for payment. There is another alternative. Get rid of all federal and local taxes, including payroll taxes, property taxes and the corporate income tax and replace it all with a flat 9 percent tax on the wealth of all American families. This would still allow for the $25,000 annual distribution to all American families so the less-advantaged and average Americans would be much better off. But I doubt the wealthy would prefer a flat 9 percent wealth tax over a “discriminatory” 3 percent wealth tax that hits only them. The wealthy will not like that the 3 percent wealth tax may eat into their real wealth over time. But the average age of the wealthiest 1 percent is 61 years old, and wealth is supposed to go down, not up, in retirement. According to Robert Merton’s theory of life cycle investing, and embraced by conservative economist Milton Friedman, people are supposed to save during their working years and then watch those savings slowly decline as they use the proceeds to fund a portion of living expenses in retirement. Theory never foresaw that the rich would grow even richer as their nest eggs continued to grow even after retirement. Finally, it might be argued that what we are trying to achieve here is an equality of outcomes, not an equality of opportunity. One need only look at the existing system to see that wealth inequality in the U.S. is causing an enormous disparity in opportunity across wealth classes. The rich and the poor in the U.S. have different neighborhoods, different protections against crime, different medical care, different schools, different universities, different job opportunities, different lawyers, different child care support, different diets, different exposure to alcohol and drug abuse, different levels of anxiety and stress, and differing rates of depression and suicide. Some will argue that collecting this tax on wealth is not practically feasible. Rich people will learn how to hide their wealth just as today they hide their incomes. To address this issue, as part of this plan we would create an organization of independent appraisers, completely separate from the IRS. One percent of the annual proceeds raised, or approximately $33 billion a year, would be sufficient to conduct thorough professional wealth audits. This is three times the budget of the entire IRS for 2018. And we would audit all 1.25 million families in the top 1 percent every year. This would not be as big a job as you think. A great proportion of the 1 percent’s wealth is in publicly traded stocks and bonds which have a stated market value. To the extent they also own private companies, these are easily valued as a multiple of pre-tax cash flows. And after the first year’s valuation work, updating the asset values to market prices in future years would be quite simple. Substantial penalties for underreporting assets, including possible jail time, would encourage the wealthy not to hide assets. For example, if anyone ever valued their net worth at less than half of its true market value and stuck by that appraisal after being challenged, the government would have the right to sell those assets in an auction and keep any proceeds beyond what the person claimed their net worth to be. Another argument against this plan might be that wealthy individuals will choose to give up their citizenship in the United States and move to foreign countries. To those wealthy individuals who would like to give up their citizenship and leave — good riddance. We don’t need their money. Capital today is fungible and moves instantaneously on the internet across national borders. To those corporations who are thinking about headquartering in a low-tax country to avoid the new tax, the solution is simple: Prohibit them from accessing the U.S. market with their products and services if they choose to try to avoid U.S. taxation. End of problem. There is no question that implementing this tax plan will cause explosive growth in the economy. When we give tax cuts to the rich, they just add the monies to their already over-stuffed bank accounts and investment portfolios. However, average Americans will make life-changing decisions with their $25,000 a year, bringing tens of millions of Americans back into a hugely dynamic and inclusive economy.

It's not hard to envision the benefits in work opportunities, stress reduction, child care, entrepreneurial activity, and artistic pursuits for American households with an extra $1,000 per month. It's also very easy to justify a financial wealth tax, given that the dramatic stock market surge in recent years is largely due to an unprecedented degree of technological and financial productivity that derives from the work efforts and taxes of ALL Americans. A 2% annual tax on financial wealth is a small price to pay for the great fortunes bestowed on the most fortunate Americans.

The reasons? Careful analysis reveals a number of excellent arguments for the implementation of a Universal Basic Income (UBI).

In recent years, marked by the infamous COVID-19 pandemic, the housing market has experienced major turbulence due to a combination of fluctuating interest rates, variations in demand and supply, among other factors.

A combination of very high demand and extremely low supply made home prices skyrocket. At the start of the pandemic, the American economy was thrown into a recession, which caused low mortgage rates (Demsas). That, combined with higher demand for real estate to house at-home workers rapidly raised housing demand. However, supply was still low. Development was happening slower if at all. These prices made it simply too expensive to purchase a home during the pandemic.