Want To Slash the National Debt? Tax Billionaires

The Biden administration successfully negotiated a deal — soon to be passed in Congress — that will allow the federal government to borrow the money it needs to meet its fiscal obligations over the next couple of years.

Despite avoiding a massive U.S. debt default that would have reverberated across the global economy, progressives and members of the Congressional Progressive Caucus are not exactly in a celebratory mood, and with good reason.

Some of the provisions contained in the debt ceiling bill, known euphemistically as the Fiscal Responsibility Act of 2023, follow the logic and politics of austerity. Programs designed to help the working class and contribute to our common good are effectively cut. Meanwhile, defense spending is exempt from any freezes despite the Pentagon’s inability to account for billions of dollars in their annual audits.

Republican lawmakers often tell us that the purpose of budget cuts and more stringent requirements to access social benefits is to reduce waste and the federal deficit. But if this were truly their goal, they have an unusual way of achieving it since they adamantly refuse to consider raising new taxes on the ultra-wealthy.

Republicans appear to have an ideological commitment to transfer resources to the most economically privileged via tax reductions. This is reflected in the GOP priority, in debt ceiling negotiations, to weaken the enforcement capacity of the IRS to ensure the richest Americans are paying their share and crack down on tax cheats, an action that would raise billions in revenue annually from those who pay tax attorneys millions to hide billions.

Such protect-the-wealthy policies are not very popular, even among the Republican base. Trump’s 2017 tax reform bill remains an overwhelmingly unpopular piece of legislation, and a majority of Republicans support higher taxes on the rich. Extending the 2017 tax cut in 2025 would blow up the deficit to continue these tax benefits for the ultrawealthy. 

A responsible debate over the budget deficit would revisit several revenue-raising proposals. The first is Sen. Elizabeth Warren’s (D-Mass.) 2019 wealth tax proposal, first put forward in her 2016 campaign for president, and the second is President Joe Biden’s Billionaire Minimum Income Tax Act introduced last year. These two bills have the potential to generate the resources we need to simultaneously reduce budget deficits while maintaining essential government services.

The ultra-wealthy have had a pretty good decade, to say the least. According to an analysis of Wealth-X’s database by the Institute for Policy Studies, the number of Americans with a net worth of $50 million or more nearly doubled from 33,470 in 2012 to 64,500 in 2022. Their total collective wealth has grown 55.4% over the same time period and sits at $12.5 trillion.

The wealth of the billionaire class has not only skyrocketed over the past 10 years, but it accelerated and accumulated wealth at an astounding rate since mid-March 2020, when stay-at-home orders were first enforced nationwide. The combined wealth of more than 700 U.S. billionaires stood at more than $4.5 trillion in 2022.

Warren’s proposal is straightforward and progressive. It would levy a 2% tax on wealth above $50 million and a 3% tax on wealth over $1 billion. We estimate that her plan would have raised more than $224 billion in 2022 alone. Extend this over the next 10 years, and the revenues raised easily exceeds — by 46% — the $1.5 trillion the debt ceiling deal is expected to “save.”

Biden’s Billionaire Minimum Income Tax has the potential to raise $360 billion over the next decade and reduce the deficit, according to White House estimates. The focus is on taxing income from owning wealth, not work. For example, capital gains and dividends received from stock ownership will no longer be taxed at a level lower than other wage income.

Policies to tax the wealthy are both good policy and good politics. They are wildly popular, with polls showing at least 70% of Americans support tax-the-top initiatives, including a majority (54%) of Republican voters.

Lawmakers need to advance policies that reduce annual deficits without undermining expenditures that provide us with a safety net and public services. This requires an increase in taxes on individuals and households at the top who have concentrated material resources at an extreme level. Taxing the wealth of the billionaire class would be a popular and efficient starting point.

Omar Ocampo is a researcher at the Program on Inequality at the Institute for Policy Studies. 

Chuck Collins co-edits Inequality.org at the Institute for Policy Study. He is the author of “The Wealth Hoarders: How Billionaires Pay Millions To Hide Trillions” and, most recently, “Altar to an Erupting Sun.” He is also a board member of the Patriotic Millionaires, a nonpartisan organization of high net-worth Americas, which advocates for restructuring the American tax system.