Every now and then, I hear proposals to fund some program by taxing the wealthy–or even just confiscating wealth above a certain level. For the purposes of this post, I’m not interested in the question of whether this tax would be a good idea. (Shocking disclosure: I don’t think it’s a good idea.) I just want to know how money is is out there at the top of the US wealth distribution. Here’s a figure from the ever-useful FRED website maintained by the Federal Reserve Bank of St. Louis.
The top line shows total net worth for the top 1% of the wealth distribution, which totals about $44 trillion. The blue line focuses on the top 0.1% of the wealth distribution, which totals about $20 trillion. For perspective, the US has something over 120 million households. Thus, the top 1% is 1.2 million households, which have average wealth of $36 million. The top 0.1% is 120,000 households, which have average net worth of $166 million. There are about 800 US households with more than a billion in net worth, which is something less than .001% of the US population, who hold a combined $5.7 trillion in net worth.
Obviously, the total wealth held by the very wealthy adds up a really large chunk of change. Just for the sake of illustration, say that we could scoop up all $44 trillion in wealth of the top 1%, or all $20 trillion of the wealth of the top 1%, and go on a spree.
(Of course, even proposing such a step is wildly impractical. It’s worth emphasizing that taxing wealth is a tricky business, because the wealth takes the form of ownership of corporate stock or companies, or in some cases land, real estate, and natural resources. Thus, somehow requiring that trillions in wealth should be paid to the government would require that these assets be sold–but if wealth is being taxed at very high rates, it’s not clear who would buy them. There’s a reason why countries that have taxes wealth typically do so at rates of 1% per year, or less, and there’s a reason why most of the European countries that experimented with wealth taxes for a time have repealed them, as discussed here and here).
Remember, we can only do this once: when the wealth has been taken, it’s not there to take again, and the incentives to build up such wealth (in a form that could be taxed) would be greatly reduced. But to put the amount in perspective, here are some potential uses for spending the wealth of the top top 0.1%).
We could take $20 trillion and give all 330 million Americans a check for $60,000. Again, we could do this once.
We could take $20 trillion and pay of about half of the accumulated US federal debt.
We could take $20 trillion and pay off most of the expected shortfall for Social Security over the next 75 years.
Of course, one can add a number of other programs and priorities here, from education to the electricity grid and everything else. My point is that even the combined wealth of the very wealthy is not an infinite amount. The US GDP in 2024 will be about $28 trillion, so $20 trillion is about 8-9 months of US economic output. The federal budget for 2024 is nearly $7 trillion, so even $20 trillion is about three years of federal spending. Of course, if the $20 trillion in wealth was taxed at 1% per year, it would be about $200 billion per year–a real chunk of money, but a little more than the US budget deficit for any given month.
Just to be clear, I’m not arguing here against (or for) having those with very high wealth (or very high income) pay more in taxes. I’m pointing out that in the context of the broader US economy, the potential revenue available from taxing only billionaires is not huge, and even the revenue from taxing hundred-millionaires has its limits. It’s not a bottomless purse that can be tossed, over and over, at every political want.
Afterthought: There is an arithmetically illiterate comment, which sometimes makes the social media rounds, that because Jeff Bezos (or Elon Musk or Bill Gates) has a net worth of say, $100 billion and there are 7.5 billion people in the world, then that rich person could just give everyone in the world $1 billion, and still have $92.5 billion left over. I will leave it to the reader to locate the error in this calculation.
