In the United States, the rate of child poverty is nearly one in five. Nearly half of Americans don’t have $400 in the case of an emergency. More than half a million families file for bankruptcy each year because they can’t afford their medical bills. At the same time, the 400 wealthiest Americans have combined assets of $3 trillion. How is it ethical that we allow the hoarding of wealth? What is the moral case against taxing that money and redistributing it?
As a society, we should ensure that every dollar in the economy creates the maximum benefit for everyone. Even using this logic, some level of inequality is good — it creates an incentive for people to be successful. Inequality can be responsible for growing the economy for everyone and fueling innovation.
On the other hand, the idea of wealth as an incentive doesn’t justify an absurd amount of inequality. There’s very little quality of life improvement between a net worth of $50 million and a net worth of $50 billion. For such little gain by the person possessing that wealth, there is a lot of social harm. Each dollar that they have in their bank account is a dollar not doing the most good it possibly could.
A billion dollars could do a lot of good for a very large number of people, but, in the hands of someone who already has $10 billion, the amount of good that it does is negligible.
Because of this, high taxes on extreme wealth are among the most efficient taxes — they generate a lot of government revenue and burden those paying relatively little. A couple of the candidates running for president in 2020 have embraced a “wealth tax” as a solution to extreme concentrations of wealth, namely Elizabeth Warren and Bernie Sanders.
Warren has proposed a tax of two cents per dollar on wealth greater than $50 million, which, over ten years, would raise $2.75 trillion. That’s enough to pay for universal childcare, shelter every homeless person in the U.S., and end world hunger — with money left over.
At the same time, Sanders is running on an even more progressive plan, with the explicit goal of abolishing billionaires. Even Democratic presidential candidate Tom Steyer, a billionaire himself, believes that a wealth tax is necessary to fight concentrated economic and political power.
There’s a wide variety of reasons to take on wealth inequality. For one, the extremely wealthy have an outsize influence on policy making that is fundamentally undemocratic. But the more immediate reason to go after the rich is simple — they don’t need the money.
It does a lot more good than bad to soak the rich with a wealth tax, so why not go for it?