The Senator of Massachusetts, Elizabeth Warren, has proposed a radical Ultra-Millionaire Tax Act to levy the United States’ top income earners.
This proposed bill is designed to “level the playing field and narrow the radical [financial] gap” in the United States. Its overriding purpose was born out of the wake of COVID-19 and will apply a wealth tax on the richest of the rich. As such, this bill will impose an annual tax of 2% on individuals with a net worth between $50M and $1B USD, and a 3% net tax for those earning over $1B USD. This will additionally benefit anti-evasion and avoidance measures traditionally employed by extremely wealthy individuals.
Despite there only being around 650 billionaires in the United States, this wealth tax would approximately rake in $114B USD for the 2020 financial year. Top earners such as Jeff Bezos, Elon Musk, Bill Gates, and Mark Zuckerberg alone would equate to a third of the entire tax who collectively hold more than $2.1T USD!
Taxing the rich naturally seems like a no-brainer move. Especially in times of crisis, this bill has the potential to heal the United States’ people by providing national vaccinations and pull the approximate 8 million Americans out of poverty. However, a research paper by the London School of Economics and King’s College London discovered that large tax cuts against extremely wealthy individuals do not benefit wealth distribution. Rather, it has a “trickle-down” effect that actually makes inequality worse. This may be why the bill was initially not accepted by the Biden administration, even though the Senator suggested funnelling the tax revenue into public programs such as childcare, education and infrastructure.
Interestingly enough, Argentina has adopted a similar millionaire tax. Although, rather than being recurring, this is a one-off levy designed to accumulate wealth from the top 0.8% of Argentinian earners and redistribute this money to supplies and equipment to combat COVID-19.
It is difficult to say whether such a tax is the answer to the financial burden brought upon by COVID-19. However, one thing is clear, wealth distribution is only going to get worse from here and we need an answer.