Proposed California Wealth Tax Bill Addresses American Inequality
This initiative follows in the footsteps of earlier proposals and is the product of a national discussion on this issue started by Senator Elizabeth Warren.
By Jim Miller
The pandemic has exposed inequities in stark terms in every aspect of American life from health care to workplace safety to housing. But while working-class people have lined up at food banks and others are anxious about the rent, America’s uber rich have had a banner year.
As the Washington Post reported recently, we just witnessed an unprecedented “billionaire boom”
The pandemic has been a boom time for America’s richest billionaires. The wealth of nine of the country’s top titans has increased by more than $360 billion in the past year. And they are all tech barons, underscoring the power of the industry in the U.S. economy. Tesla’s Elon Musk more than quadrupled his fortune and jockeyed with Amazon’s Jeff Bezos for the title of world’s wealthiest person. Facebook’s Mark Zuckerberg topped $100 billion. Google co-founders Larry Page and Sergey Brin gained a combined $65 billion.
Nearly all this wealth accumulation was tied to the share price in the companies the men co-founded or lead, and in which they remain significant shareholders. Amazon benefited while consumers shopped from home, as many of its bricks-and-mortar rivals struggled to keep pace. Google, Facebook and Microsoft helped power the new work-and-learn-from-home reality.
But the staggering rise in their gains contrasts with the economic devastation of millions of Americans, amid soaring unemployment and evictions, drawing attention to issues of inequality and distribution of wealth. In fact, the $360 billion increase in top billionaire wealth approaches the $410 billion the U.S. government is spending on the latest round of $1,400 stimulus checks, passed with the $1.9 trillion pandemic relief package this week.
To really see the big picture of American inequality, one needs to focus not just on the obscenely huge income gap but also on the even more significant wealth gap.
As Robert Reich has pointed out, in the United States the wealth gap has exploded over the last few decades with the share of household wealth controlled by the richest 10% of Americans going from one third in the 1970s to 75% today. When one drills down a little deeper into the numbers, the level of inequality is even more dramatic with the top one-tenth of one percent of Americans owning as much as the bottom 90% of the rest of us.
This reality inspired Senator Bernie Sanders to hold hearings on economic inequality in the Senate and has President Biden pondering a significant tax increase on top earners and corporations to help fund the national recovery.
Here in California, some legislators aren’t waiting for the Federal government to address this mind-boggling imbalance, as my union, the California Federation of Teachers, is sponsoring a tax on extreme wealth. As the news release last week noted:
Since the beginning of the pandemic last March, while our families and our communities have suffered gut-wrenching pain and loss, billionaires in our state alone have increased their wealth by over half a trillion dollars.
And their numbers and their extreme wealth just keep on growing. In March 2020, just as COVID began, there were 154 billionaires in California – with a total wealth of $688.3 billion. In January 2021, there were 169 billionaires in California – with a total wealth of more than $1.2 trillion.
On March 15, Assemblymember Alex Lee introduced a new legislative package, The California Tax on Extreme Wealth. Sponsored by CFT, the package would implement a 1% tax on wealth in excess of $50 million per household in our state, with an additional 0.5% on wealth in excess of a billion dollars, to raise approximately $22 billion a year to fund our recovery. It asks those who have made so much to contribute a small percentage of their extreme wealth so that our families and our communities can recover from the pandemic and can rebuild their lives.
Of course, this initiative follows in the footsteps of earlier proposals and is the product of a national discussion on this issue started by Senator Elizabeth Warren. After the announcement of the California Tax on Extreme Wealth, NBC news reported that:
The plan mirrors national efforts by Sen. Elizabeth Warren, D-Massachusetts, and other members of Congress who earlier this month proposed the Ultra-Millionaire Tax, which would impose a 2 percent annual tax on the net worth of households and trusts above $50 million, with a 1 percent surtax on the net worth of those above $1 billion.
"We need sizable reinvestments to our community from those who aren't paying their fair share," Lee said at a briefing Monday with fellow state Assemblymembers Lorena Gonzalez, D-San Diego, Miguel Santiago, D-Los Angeles, and Luz Rivas, D-Arleta, and advocates for the wealth tax, including the California Federation of Teachers.
In the wake of the relief package’s passage there has been a lot of discussion of how Biden and the Democrats are returning to the legacy of the New Deal and looking to reverse both the neoliberal turn in the national party and the anti-government ethos ushered in by the Reagan revolution with its promise to “starve the beast” of government until it was small enough to “drown in a bathtub.”
Now, with the Covid-19 crisis, the American people want their government to deliver for them and do the kinds of things that only large collective efforts can accomplish.
While all of that talk is encouraging for progressives, one of the heavy lifts for Democrats and their allies will be answering the “how do you pay for it” question. What the wealth tax does is give them an answer that is popular with most Californians and the American people as a whole and is deeply rooted in social justice.
Beyond immediate relief, we need to reinvest in our communities, pave the way for real equity in our society at all levels, rebuild our infrastructure, and fight catastrophic climate change. We can’t afford to fail. The resources to do all of these things are there, and the only real question is whether or not we will have the political courage to ask the richest people in the world to pay their fair share to help ensure a just and sustainable future.
It’s time to seize the moment.
If you’d like to take a small step toward that more just future, sign the pledge to support a wealth tax in California: https://actionnetwork.org/forms/taxextremewealthca.