The centibillionaire club–those with over $100 billion in wealth–likely will be welcoming a new member soon. Forbes now estimates Michael Bloomberg’s wealth at $94.5 billion, making him the sixth richest American. If his wealth continues to grow at the rate it’s grown since 2013, Michael Bloomberg will join the centibillionaire club by the end of the year. At that point, he will be the 10th American to have reached that wealth level (including four whose wealth subsequently slipped below that level).
Forty years ago, the mere billionaire club had just 13 members, and Daniel Ludwig, the richest American at the time, had a total wealth (adjusted for inflation) of $6.15 billion.
Today, $1 billion of wealth in one person’s hands often means far too much political power, but that astounding amount of money is now considered a rounding error in the context of America’s largest fortunes. America’s 20 richest billionaires spent more than the entire Biden campaign on the 2020 elections. According to political scientists Jeffrey Winters and Benjamin Page, the political influence of each of the 400 richest Americans is 22,000 times that of the average member of the bottom 90%.
How we got to this point is no mystery. Consider Mr. Bloomberg. His wealth has been rising at a rapid clip since at least 2013 when it stood at $27 billion. But rising wealth didn’t require him to pay much in tax. Between 2013 and 2018, Americans for Tax Fairness reported, Bloomberg’s federal income tax payments totaled only 1.8% of the $28.5 billion growth in his wealth.
What all Americans whose wealth has passed the $100 billion threshold have in common, besides being male and white, is tax avoidance. Between 2013 and 2018, none made federal income tax payments greater than 11% of their wealth growth–and all but two paid less than 5%.
Why do we have multiple centibillionaires today–and why are we on a path to have trillionaires in the not-too-distant future? Because our federal tax system is failing to adequately impede the accumulation of massive fortunes. It’s that simple: if you don’t sufficiently tax the super-rich, they’ll accumulate unhealthy sums of wealth. Then they’ll use a small slice of that obscene wealth to buy power, including the power to accumulate even greater wealth. It’s a vicious cycle that is destroying American democracy.
President Biden’s budget contains several proposals that would begin to reverse this vicious cycle. His Billionaire Minimum Income Tax would prevent ultra-wealthy Americans from holding assets for decades, or even lifetimes, while not paying tax on their enormous wealth gains. His proposals to plug loopholes in the estate and gift tax system ultimately would allow that system to function in the manner it was intended: to reduce the size of massive family fortunes with each generation. Unfortunately, because the great majority of America’s ultra-rich already have implemented estate tax avoidance plans, it could be half a century or more before those proposals fully take effect.
However, there is a critical tax proposal in the President’s budget to which scant attention is being paid: taxing income from wealth at the same rate as income from work for those with incomes over $1 million. Unless that proposal or something similar is enacted, the accumulation of massive, democracy-threatening fortunes in America will continue.
Consider Mr. Bloomberg’s situation. Even in the absolute worst-case tax scenario for him, selling all his assets for their estimated value of $94.5 billion with $50 billion of the proceeds taxable as capital gains, his total tax bill is still relatively minor. Even living in New York, which taxes capital gains at a higher rate than all but a few other states, his total federal and state tax bill would be $16.3 billion, leaving him over $78 billion in wealth. At the rate Bloomberg’s wealth has been growing–doubling roughly every five years–he’d still be worth over a quarter-trillion dollars in less than a decade.
Does it make sense to be ushering in the accumulation of trillion-dollar fortunes when tens of millions of Americans can’t afford health care and 17% of our children live in poverty?
In a word, no. Even Ronald Reagan recognized that it’s “crazy” for a society to tax a bus driver at a higher rate than a millionaire. Do you know what’s a hundred thousand times crazier? Taxing a bus driver, or any worker for that matter, at a higher rate than a centibillionaire. Not only will it exacerbate an already horrendous situation of wealth concentration in America, it insults the dignity of work.
Taxing income from wealth at the same rate as income from work would be a critical step in the right direction, but we need to go a step further than the Biden budget proposal. It’s not only crazy to tax workers at higher rates than millionaires and billionaires, it’s equally crazy to tax millionaires at the same rates as billionaires. Currently, those with incomes over $700,000 are in the same marginal tax bracket as those with incomes over $700 million. Common sense dictates that must change. We need a rate structure like the one that existed between 1944 and 1980, at the height of America’s prosperity, when the progressivity of the income tax didn’t end at the very bottom of the top one percent, but continued to a maximum rate of no less than 70% and, prior to 1970, much higher.
Or we can watch our billionaires become trillionaires, as the rest of us struggle for food, health care, and housing.
Bob Lord, a tax lawyer for 40 years, is a senior advisor on tax policy for the Patriotic Millionaires.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
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