Taxation of Financial Capital: Is the W ealth T ax the Solution?

Emmanuel Saez UC Berkeley

PIIE Inequality Conference October 2019

1 Total household wealth (to national income)

500%

Ma rket ue 400% val income 300%

200% of national of %

100%

0% 1913 1918 1923 1928 1933 1938 1943 1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 2018 This figure depicts the share of total household wealth relative to national income Source: Piketty, Saez, and Zucman (2018). Top 0.1% Wealth Share Estimates 25% Capitalization

Revised capitalization 20%

SCF+ 15%

10%

Estate m ul tiplier 5% (adjusted)

0% 1913 1918 1923 1928 1933 1938 1943 1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 This figure depicts the share of total household wealth owned by the top 0.1% of families (tax units) from various data sources. Forbes 400 wealth share (% of US wealth) 3.5%

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0% 198 2 198 6 199 0 199 4 199 8 200 2 200 6 201 0 201 4 201 8 Long-Term Wealth Taxation and Top Wealth Holders

Current 2018 wealth ($ billions)

Top Wealth Holder Source 1. Amazon (founder) 160.0 2. Bill Gates Microsoft (founder) 97.0 3. Berkshire Hathaway 88.3 4. Facebook(founder) 61.0 5. Oracle (founder) 58.4 6. Larry Page Google (founder) 53.8 7. David Koch Koch industries 53.5 8. Koch industries 53.5 9. Sergey Brin Google (founder) 52.4 10. M. Bloomberg Bloomberg LP (f.) 51.8 11. Jim (heir) 45.2 … Total top 15 942.5 Average Tax Rates (Fed+State+Local) by Income, 2018 50%

40% Estate taxes

30%

Individual income taxes 20% Payroll taxes 10% Corporate & property taxes Consumption taxes 0% Impact of the wealth taxes on total tax rates (fed+state) with Sanders wealth tax 70% (5% above $1bn, up to 60% 8% above $10bn 50% with Warren income wealth tax 40% (3% above $1bn) 30% - taxpre of 2018 tax rates % 20%

10%

0% Long-Term Wealth Taxation and Top Wealth Holders

With Warren With Sanders Current 2018 wealth tax (3% wealth tax (5% wealth above $1b) above $1b up to ($ billions) since 1982 8% above $10b)

Top Wealth Holder Source 1. Jeff Bezos Amazon (founder) 160.0 86.8 43.0 2. Bill Gates Microsoft (founder) 97.0 36.4 9.9 3. Warren Buffett Berkshire Hathaway 88.3 29.6 8.2 4. Mark Zuckerberg Facebook (founder) 61.0 44.2 28.6 5. Larry Ellison Oracle (founder) 58.4 23.5 8.5 6. Larry Page Google (founder) 53.8 35.3 19.5 7. David Koch Koch industries 53.5 18.9 8.0 8. Charles Koch Koch industries 53.5 18.9 8.0 9. Sergey Brin Google (founder) 52.4 34.4 19.0 10. M. Bloomberg Bloomberg LP (f.) 51.8 24.2 11.3 11. Jim Walton Walmart (heir) 45.2 15.1 5.0 … Total top 15 942.5 433.9 195.7 Forbes 400 wealth share (% of US wealth) 3.5%

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0% 198 2 198 6 199 0 199 4 199 8 200 2 200 6 201 0 201 4 201 8 Forbes 400 wealth share (% of US wealth) 3.5% Actual share of wealth owned by the Forbes 400 3.0%

2.5% With moderate wealth tax (3% rate above $1bn) 2.0%

1.5%

1.0%

0.5%

0.0% 198 2 198 6 199 0 199 4 199 8 200 2 200 6 201 0 201 4 201 8 Forbes 400 wealth share (% of US wealth) 3.5% Actual share of wealth owned by the Forbes 400 3.0%

2.5% With Warren wealth tax (3% rate above $1bn) 2.0%

1.5%

1.0% With Sanders wealth tax (5% above $1bn graduated to 8% above $10bn) 0.5%

0.0% 198 2 198 6 199 0 199 4 199 8 200 2 200 6 201 0 201 4 201 8 PROGRESSIVE WEALTH TAX PROSPECTS

Wealth tax powerful tool to restore tax progressivity

Revenue and de-concentration potential in US context

With successful enforcement, you get at least one of these 2 (revenue first, de-concentration second)

Empirical evidence: enforcement is a policy choice

1) US taxes expatriates

2) US forces foreign banks to report accounts of US residents

3) Wealth proposals hit only the super-wealthy (top .1%)

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