Excessive Wealth Is a “Disorder” That Some 1 Percenters Want to Cure

And Sen. Joe Manchin just made that a whole lot harder.

Getty Images

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.

Joe. Friggin. Manchin. The odds weren’t good for Congress to make the mega-wealthy pay more taxes, but the Democratic senator from West Virginia killed off any chance of it on Thursday, declaring that he wouldn’t support any tax increases to fund Democratic priorities, including programs to control climate-warming emissions.

Manchin’s move comes just as groups of wealthy progressives who want the federal government to show less financial favoritism toward, well, them, were busy launching new campaigns in favor of taxing the mega-rich, which polling shows is a popular policy. On Wednesday, four groups affiliated with high-net-worth liberals—Patriotic Millionaires, Responsible Wealth, Solidaire, and Voices for Progress—publicly urged Senate leaders to enact the so-called millionaire surcharge, which already appeared to have been stripped from the reconciliation budget that Senate Majority Leader Chuck Schumer had been negotiating with Manchin and the party’s other legislative bête noire, Sen. Krysten Sinema of Arizona.

Despite its misleading moniker, the proposed millionaire surcharge would only have affected the top-earning 0.02% of taxpayers, slapping a 5 percent additional tax on individuals with adjusted gross incomes—that’s after deductions—exceeding $10 million, and another 3 percent on incomes above $25 million. It would have raised an estimated $230 billion over 10 years, the Biden administration said. With the initiative now dead, Patriotic Millionaires and the others expressed their condemnation.

The surcharge had been included in the version of Build Back Better passed by the House last November. The nonprofit Americans for Tax Fairness calculated that it would have raised the average federal tax rate of the nation’s 15 highest earners from 22.4 percent to just under 30 percent. Bill Gates, for example, whose average annual income from 2013 to 2018 was a tad over $2.8 billion, would go from paying 18.4 percent to 26.4 percent overall. But Manchin and Sinema killed the proposal.

Senate Finance Committee staffers were also eying a more politically palatable revenue-raiser to fund the Democrats’ trimmed-down wish list. This requires a quick primer: In 2013, to help fund the Affordable Care Act, Congress enacted the net investment income tax (NIIT), a 3.8 percent surcharge on the incomes of certain pass-through businesses and individual taxpayers who take home more than $200,000.

But the original provision was sloppily drafted, with “exemptions upon exemptions upon exemptions—it’s full of holes,” explained Steve Rosenthal, a senior fellow at the Brookings-Urban Tax Policy Center. Private equity managers and real estate developers, for instance, easily sidestep the tax.

The Finance Committee’s Hail Mary was to eliminate those exemptions, a move that would bring in about $250 billion over a decade, Rosenthal noted—more than the millionaire surcharge would have. “And who is hit?” he said. “It’s really at the very top end.” The proposal to kill the NIIT loopholes had better odds of survival than the surtax did, he added, although “it’s unclear to me that anything will be enacted” by this Congress. 

Meanwhile this week, Bay Area activist and philanthropist Alan Davis launched the new Excessive Wealth Disorder Institute—the name was inspired by a Paul Krugman column—with the goal of tackling wealth inequality from the top down. Although Davis launched EWDi on Bastille Day, he’s not actually seeking the removal of super-rich people’s heads—just the removal, in his view, of their undeserved financial advantages.

EWDi “will study all things related to the ultra-rich, the 0.1% of our society, and promote a cure for this disorder which is affecting all of us, whether one is ultra-rich or not,” Davis wrote in the newsletter of the Crisis Charitable Commitment, a philanthropic reform effort he also spearheads. “We’ll lift up the excessive wealth problems, challenge so-called meritocracy, and explore what it means to have ‘enough,’ so that we move toward an economy built on shared prosperity and racial justice.”

For its first project, the Tax the Ultra-Rich Now campaign, EWDi is teaming up with Americans for Tax Fairness, Working America, Health Care for America Now, the Working Families Party, and others to highlight tax and inequality issues in five battleground states—Georgia, Nevada, North Carolina, Pennsylvania, and Wisconsin—in the run-up to fall’s midterm elections. The institute also hopes to replicate the landmark experiments of psychologists Michael Norton and Dan Ariely, who demonstrated, based on survey data collected in 2001, how poorly Americans understood the magnitude of wealth inequality in the United States.

Some 225 participants joined Thursday’s Zoom call announcing the launch, where guest speaker Gabriel Zucman, a UC Berkeley economist who specializes in inequality and tax havens, gave a short presentation. Zucman displayed a chart that I discuss in my own recent book, Jackpot, showing the combined rate of state, federal, and local taxes we Americans pay depending upon our income tier.

Tallying up the combined taxes results, basically, in a big flat tax across income groups that averages about 28 percent. The lowest-income Americans pay about 25 percent on average, and the 0.1 percenters pay a little over 30 percent—but when you hit the tippy tip-top, the overall tax rate of the 400 highest earners sinks below that of America’s poorest. That’s because, as Zuman explained, it’s easy for billionaires, with all their fancy lawyers and accountants, to structure their finances so as to avoid taxable income almost entirely. 

Zucman showed another chart, this one depicting the share of the total national wealth held by the 18 richest people in America—the top 0.00001 percent. In 1985, this rarified group owned about 0.1 percent of the spoils, according to his data. Now they own 1.2 percent. 

“Just pay your taxes!” mused another speaker, Maurice Mitchell, national director of the Working Families Party. “It is a very easy idea for most people to understand. When you hear that ideas are ‘complicated,’ what that usually means is that the very wealthy or the powerful will have to give up wealth or power. That’s the complicated in complicated—it isn’t that complicated.”

“We believe the wealthy and powerful don’t deserve a special seat all to themselves in the halls of power,” he went on. “In a democracy, they must wait their turn like everybody else and take their appropriate space, and not elevate their voice with their money, power, and privilege.” And right now is the time this needs to happen, he insisted, because “Over the next decade, we’ll be deciding whether we’ll be a democracy or an autocracy.”

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with The Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with The Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate