On November 9, 1999, Donald J. Trump proposed on CNN that the United States impose a one-time 14.25 percent tax on the net worth of individuals and trusts of $10 million or more. The resulting estimated $5.7 trillion in new taxes could then be used to eliminate the national debt. That may be too simplistic and radical, but the notion of using wealth as an additional source of tax revenue might spur discussion of added sources of tax revenues. The United States could introduce a carefully-crafted small tax on wealth exceeding a large amount. Many countries supplement income taxes with diverse sources of taxes. The United States may well benefit by adding tax revenues from an annual net wealth tax. A wealth tax might be based on household assets such as property, stocks, bonds, net worth of unincorporated businesses, trusts, and yachts. It could have a high wealth exemption, such as $4 million, and progressive, incremental rates of taxation, starting at around 1 percent.
In reality, many governmental expenditures need to be increased, rather than being cut back. This is so for improving opportunities for workers displaced by technological changes to find other employment. It is also true for improving educational opportunities for young people in disadvantaged circumstances. Or consider our infrastructure needs. Severe hurricane damage in Texas, Florida, Puerto Rico, and elsewhere in the United States needs to be overcome in enduring ways; while other areas that are vulnerable to rising ocean levels need to be made secure. Furthermore, decaying sewage and transportation systems endanger all Americans, and extensive repairs and improvements are vitally needed. A massive infrastructure program would enhance our safety and health and have other side benefits. Significantly, employment in construction and many related industries would greatly increase and therefore wages would tend to rise.
Wealth inequality in the United States is extremely large and rapidly increasing. Aside from moral or fairness concerns, the large and growing wealth inequality has severe damaging effects on American society. The harm it does to American democracy is grave. A small number of extremely wealthy persons use their resources to influence public opinion so they can get still richer. They have relatively great influence in the election and the selection of government officials, and how those officials act. Under President Donald J. Trump, many of them actually now hold public office. Immense inequality in the U.S., especially as compared to other economically advanced countries, is turning our country from one governed democratically into one ruled by a moneyed oligarchy. This growing inequality should be checked.
If adopted, the Republican tax and budget plans will exacerbate many social problems in the United States. Wealth and income inequalities will increase, the national debt will rise, and environmental damage will grow. Governmental support for basic research and provision for coping with the challenging consequences of new technological developments will be diminished.
A small wealth tax will not solve all the social, political, and economic problems in the United States, but it could help reduce their severity. Of course, there are challenges to formulating an effective wealth tax. But now is the time for creative thinking about diversifying the sources of the federal government’s tax revenues. The American public should insist on real tax reforms that will help improve the opportunities for all Americans to live fuller lives.