Well there is a robust debate about US inequality going on thanks to Thomas Piketty’s fine book “Capital in the 21st Century” that I am reading, and will review in due course. In a recent exchange on line, someone asked if those concerned about inequality were suggesting we go back to the top income tax rate of 90% of the 1950s. And here was my response. Piketty has got me into the idea of using real numbers or at least his good estimates, from which I draw the numbers used below.
No I think top end 90% income tax rates is going too far. On income I would be fine with all income being treated the same at current rates, with no special rates for capital gains and no shelters. Indeed if we made sure there was far less evasion by the rich, we could even reduce the rates somewhat.
On wealth the 340,000 people who constitute the top 1% have 35% of all the $80 trillion of US wealth (compared with US GNP of $16 trillion). So they have around $28 trillion including an estimated $8 trillion in offshore tax havens on which they have paid no tax (see evasion comment above).
I am in favor of a wealth tax that took perhaps 3% of said $28 trillion wealth each year or around $840 billion and spent it on scientific research and education and on improving our crumbling infrastructure so there was a societal pay back, a time adjusted rate of return of perhaps 10 or 15% on such money with society as a whole receiving the pay off in terms of more competitive business, more efficient roads and rail, more resilient electricity grid and water supply or whatever. So we would be taking wealth and making more wealth from it not short term handouts.
Though, of course, if we gave every one of the 140 million wage earners in the other 99% an equal share of the $840 billion it would give each $6000 a year which could be a tax rebate, pay some of our healthcare costs, or go towards school fees, whatever. Not bad but I think spending the money on capital improvement would be better in the long run and by making the economy more prosperous that would pay for social security, Medicare and other long term programs that need better funding as well as waste reduction.