Economic inequality in the United States is at its highest point in more than five decades since the Census Bureau first started measuring it. Jeff Bezos, Bill Gates, and Warren Buffet together own more wealth than the bottom half of the entire country — about 160 million people. Wages for the vast majority of Americans are barely growing and when factoring in inflation, real wages have actually fallen 9% since 2006, while those lucky enough to be in the top one-tenth of the 1 percent have never been richer.
The American inequality crisis is here, and it’s not going to go away until we do something about it. We need to tax the rich. But how do you tax the rich in a way that effectively narrows that wealth gap and only affects the 268,000 or so individuals that make up a tiny bit of the top 1 percent?
Enter the Millionaires Surtax.
The Millionaires Surtax is a tax plan laser-focused on getting to the core of the problem facing this country — extreme wealth, and our current tax code’s failure to treat it just like the wages of working Americans. It does this by imposing a 10% surtax on all annual income above $2 million, or within the top 0.2% of incomes. The key word here is “all” income, since most of those 268,000 people don’t make their vast sums of money off of salaries or wages like the rest of the country, but through investment income like capital gains.
Enacting a surtax on both these types of income is absolutely critical to bridging the inequality divide. As the top 1% have rapidly increased their share of the nation’s wealth over the past decade, their tax rates have steadily dropped, and it’s no coincidence that this period coincides with skyrocketing inequality. Thanks to the outrageous number of special tax breaks and loopholes that investment income gets in our tax code, in 2018, the 400 richest Americans actually ended up paying a lower effective total tax rate — a measly 23% — lower than any other income group in this country spanning federal, state, and local taxes.
What’s more, tacking a surtax onto both types of income dodges a key problem in most progressive taxation plans. Other proposals currently being debated in the public sphere, such as the 70% top marginal income tax rate championed by Rep. Alexandria Ocasio-Cortez, are great ideas for tackling salaried income inequality, but since the super-rich rarely actually work for a living raising income tax rates doesn’t effectively hit the source of their extreme wealth. Jeff Bezos, for instance, could theoretically take a $1 check from Amazon for his work as CEO while still owning billions of dollars worth of Amazon stock, successfully avoiding that tax and continuing to amass piles of wealth. Under the Millionaires Tax, Bezos would owe the IRS 10% on every dollar over his first $2 million annually, regardless of whether those dollars came from a paycheck, a stock sale, or from selling a yacht or two.
The Millionaires Surtax is also an incredibly easy sell to the American public. A clear majority of both Democrats and Republicans alike support raising taxes on the ultra-wealthy and believe the government should take steps to reduce inequality. This tax would make serious headway on both of those goals, and by targeting only the very top of the top 1% — a couple hundred thousand people in a country of over 350 million — it’s easy to communicate to the average voter that this tax wouldn’t affect them and will only hit those who can easily afford it.
The Millionaires Surtax is simple, efficient, and laser-focused on the richest people perpetuating the worst inequality we’ve seen in our lifetimes. Inequality of this magnitude can and will hurt everyone in the country, including the rich. It’s time for everyone — even those in that top 0.2% — to get on board.