Once in a while, I hear proposals to fund some program by taxing the rich–and even simply confiscating wealth above a sure stage. For the needs of this put up, I’m not within the query of whether or not this tax can be a good suggestion. (Stunning disclosure: I don’t suppose it’s a good suggestion.) I simply need to understand how cash is is on the market on the prime of the US wealth distribution. Right here’s a determine from the ever-useful FRED web site maintained by the Federal Reserve Financial institution of St. Louis.
The highest line reveals whole web price for the highest 1% of the wealth distribution, which totals about $44 trillion. The blue line focuses on the highest 0.1% of the wealth distribution, which totals about $20 trillion. For perspective, the US has one thing over 120 million households. Thus, the highest 1% is 1.2 million households, which have common wealth of $36 million. The highest 0.1% is 120,000 households, which have common web price of $166 million. There are about 800 US households with greater than a billion in web price, which is one thing lower than .001% of the US inhabitants, who maintain a mixed $5.7 trillion in web price.
Clearly, the entire wealth held by the very rich provides up a very giant chunk of change. Only for the sake of illustration, say that we might scoop up all $44 trillion in wealth of the highest 1%, or all $20 trillion of the wealth of the highest 1%, and go shopping.
(After all, even proposing such a step is wildly impractical. It’s price emphasizing that taxing wealth is a tough enterprise, as a result of the wealth takes the type of possession of company inventory or firms, or in some instances land, actual property, and pure assets. Thus, one way or the other requiring that trillions in wealth must be paid to the federal government would require that these property be bought–but when wealth is being taxed at very excessive charges, it’s not clear who would purchase them. There’s a motive why nations which have taxes wealth sometimes achieve this at charges of 1% per 12 months, or much less, and there’s a motive why many of the European nations that experimented with wealth taxes for a time have repealed them, as mentioned right here and right here).
Bear in mind, we are able to solely do that as soon as: when the wealth has been taken, it’s not there to take once more, and the incentives to construct up such wealth (in a type that may very well be taxed) can be enormously decreased. However to place the quantity in perspective, listed below are some potential makes use of for spending the wealth of the highest prime 0.1%).
We might take $20 trillion and provides all 330 million Individuals a test for $60,000. Once more, we might do that as soon as.
We might take $20 trillion and pay of about half of the gathered US federal debt.
We might take $20 trillion and repay many of the anticipated shortfall for Social Safety over the following 75 years.
After all, one can add a variety of different packages and priorities right here, from training to the electrical energy grid and all the pieces else. My level is that even the mixed wealth of the very rich is just not an infinite quantity. The US GDP in 2024 will probably be about $28 trillion, so $20 trillion is about 8-9 months of US financial output. The federal finances for 2024 is almost $7 trillion, so even $20 trillion is about three years of federal spending. After all, if the $20 trillion in wealth was taxed at 1% per 12 months, it could be about $200 billion per 12 months–an actual chunk of cash, however just a little greater than the US finances deficit for any given month.
Simply to be clear, I’m not arguing right here in opposition to (or for) having these with very excessive wealth (or very excessive earnings) pay extra in taxes. I’m declaring that within the context of the broader US financial system, the potential income out there from taxing solely billionaires is just not big, and even the income from taxing hundred-millionaires has its limits. It’s not a bottomless purse that may be tossed, time and again, at each political need.
Afterthought: There may be an arithmetically illiterate remark, which generally makes the social media rounds, that as a result of Jeff Bezos (or Elon Musk or Invoice Gates) has a web price of say, $100 billion and there are 7.5 billion individuals on the earth, then that wealthy particular person might simply give everybody on the earth $1 billion, and nonetheless have $92.5 billion left over. I’ll depart it to the reader to find the error on this calculation.
