Does America need a Wealth Tax?
The Wealth Tax debate will expand because America has more billionaires with more money after the COVID-19 pandemic.
The number of US billionaires rose by 15% between 18 March 2020 and 10 March 2022, Americans for Tax Fairness estimates. The group estimates there were 614 US billionaires in March 2020 and 704 billionaires in March 2022.
Total US billionaires’ wealth grew from $2.948 trillion on 18 March 2020 to $4.621 trillion on 10 March 2022. That is an increase of 56.8% or $1.673 trillion, Americans for Tax Fairness estimates.
Could Billionaires’ Wealth Finance the Federal Government?
Hence, American billionaires’ wealth could exceed federal tax revenues. The Peter G. Peterson Foundation estimates federal tax revenues could be $4.39 trillion or 18.1% of the US gross domestic product (GDP) in 2022.
Billionaires’ wealth raises some interesting questions. In particular, the possibility of eliminating some federal taxes.
To elaborate, I calculate a 75% wealth tax on billionaires alone could raise $3.46575 trillion. If we could collect all that money, Congress could eliminate the $1.4048 trillion the federal government collects in payroll taxes or FICA. Hence, working people could take home more of their paychecks. The federal payroll or FICA tax finances Social Security and Medicare.
How much money could a Wealth Tax Raise?
Astonishingly, there could be enough money left over to finance the defense budget after eliminating FICA. The US Department of Defense is requesting a $770 billion budget for 2023.
Interestingly, we could even eliminate the federal individual tax if we had 75% wealth tax on billionaires. To explain, the individual income tax accounts for 53% of federal tax revenues, or $2.3267 trillion.
With a higher wealth tax on billionaires, say 90% we could eliminate both FICA and the federal individual income tax. For example, I calculate a 90% wealth tax on billionaires could generate $4.1589 trillion. I calculate the FICA and individual income taxes could raise $3.7347 trillion in 2022 using the Paul J. Peterson Foundation’s numbers.
Could America Eliminate Income and Payroll Taxes?
Theoretically, we could eliminate the payroll and income taxes with a high wealth tax on billionaires.
Obviously, the politician who proposes such a tax could be incredibly popular. Most Americans hate the income tax and the FICA tax is unpopular. Yet we never hear such suggestions.
My guess is politicians oppose a wealth tax because of all the donations from billionaires and other rich people. Notably, many politicians themselves are wealthy. Investopedia estimates three US Senators, Mitt Romney (R-Utah), Mark Warner (D-Virginia), and Rick Scott (R-Florida) were worth over $200 million in 2021. Plus, Investopedia estimates 10 US Senators were worth over $10 million in 2021.
Billionaires’ money shows a wealth tax could be better than America’s current tax system.Americans need to think about a wealth tax because it could cut or eliminate ordinary Americans’ tax bill.