We should implement specific policies to reduce wealth inequality in America:
A 90% marginal tax on all annual household income over $250,000.
A 90% tax on inheritance.
These changes would dramatically reduce wealth inequality over time and enable us to reap the benefits of effective capitalism while minimizing the significant drawbacks associated with rampant economic inequality.
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I believe wealth inequality is the biggest problem America faces and the underlying cause of many of our most troublesome issues. It’s undermining the American dream, our democracy, and the nature of modern capitalism itself. When I say this to friends and colleagues, they often react with surprise and skepticism. In fact, as I write these words and try to clearly describe exactly what I believe, I myself struggle with the magnitude of the impact of wealth inequality in our country. But the more I think about the current status of the U.S. and its trajectory for the future, the more I come back to this fundamental assessment. As much as things like unequal public education, the influence of money in politics, excessive executive compensation, and persistent racism undermine the success and happiness of our citizens, I think wealth inequality is more significant than all of them and is in many cases a root cause of these other problems.
In some of my other proposals I’ll talk more about inequality, its effect on society, and how it relates to other challenges our country faces. This is obviously a complex topic with lots of elements, and I’ll try to share my thoughts about many of them. But in my view it’s essential to be clear about how we might address wealth inequality at the high level, because this is a topic that sometimes seems complex whereas I think we can be quite clear.
What should we do about it? What can we do?
It seems like many people talk about inequality and worry about its impact, but few people propose specific solutions to address it. I don’t understand why this happens. I think the potential solutions are quite clear, and they’ve been done before in America in some form. In fact, I think it’s critical to focus on inequality precisely because it can be directly and effectively addressed, and because if we make progress in reducing inequality we can lay the groundwork for progress on many other important issues in society. I think we should pursue two specific strategies to reduce wealth inequality:
- Implement a 90% marginal tax on all annual household income over $250,000.
- Implement a 90% tax on all inheritance.
Neither of these ideas is new, and both have precedent in both philosophy and policy. If we want to get serious about reducing wealth inequality, these are the kinds of steps we should take.
Implement a 90% marginal tax on all annual household income over $250,000.
Median annual household income in the U.S. is about $50,000. This means half of all households in America–half!–earn less than this. A tiny fraction earn more than $100,000 annually, which is double the median level. A high marginal tax on households that earn five times the median income–five times–would affect less than 1% of the population in a meaningful way, but would dramatically limit extreme inequality. While this solution would only address income and not wealth (which is the key issue), it would be an important start towards reducing ongoing inequality.
Implement a 90% tax on all inheritance.
The single biggest cause of persistent wealth inequality is inheritance. Inter-generational transfers of wealth completely undermine a meritocratic system and make equal opportunity an illusion. This is not new and has been a primary element of the “ruling class” of societies throughout history. It should stop. Inherited wealth simply has no place in a modern merit-based capitalist system. Like the marginal tax on high levels of income, this tax would affect very few members of society, but would dramatically reduce inequality over time.
These are changes we could make if we chose to–they don’t require new technologies or inventions beyond our reach. But of course they would require major paradigm changes for our country. I think we need to make these changes if we want to preserve our society. I’ll be writing more articles to clarify these proposals and provide my rationales, but the starting point is to make the proposals clear. If we think inequality is a fundamental problem in our society we can reduce it. I think we should.