Wealth tax improves inequality – puts money back into public and economy

If we need to raise revenue, taxing the rich is a logical place to start given exploding income inequality and wealth inequality.

Data from inequality researchers Piketty, Saez and Zucman show that Americans in the bottom half of the income distribution have seen their share of total U.S. income fall from 17 percent in 1979 to 11 percent in 2016. Meanwhile, the top 1 percent of the income distribution have seen their share of total U.S. income rise from 12 percent to 21 percent over that same period.

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Wealth inequality in the U.S. is even more severe than income inequality. The top 1 percent of Americans defined by net worth have seen their share of total wealth in the U.S. rise from about 23 percent in 1979 to about 39 percent in 2016. Meanwhile, the bottom 90 percent of Americans defined by net worth have seen their share of total U.S. wealth fall from about 34 percent in 1979 to 26 percent in 2016.

Wealth inequality is the compounded effect of years of income inequality. A federal wealth tax can be part of the solution.

Inequality itself can slow down the economy.

As David Leonhardt wrote today, “A large portion of society’s resources are held by a tiny slice of people, who aren’t using the resources very efficiently.” It is likely more efficient for the government to invest a portion of those resources in ways that will spread them throughout the economy. For example, if tax dollars are collected from millionaires and used to pay those who build highways, provide health care and teach children, that, in effect, builds the middle-class consumers that drive our economy. It is not clear that an economy built around consumption (as ours is) can thrive when resources are locked up among a tiny elite.