The two charts here capture the sad and bedraggled state of our union. Since 1980 or so, we have endured a kind of Downton Abbey in reverse. Rather than empowering the middle classes, the top 2 percent of earners are sucking the vitality out of the country. Within just the past few weeks, we have discovered yet another symptom of this: the school-admissions scandal—millions of dollars paid to assure that a favorite child will be guaranteed a spot at a top university—just as the sons of the upper classes were assured of a place in the Etons and Harrows of Edwardian England.
As the charts make clear, the bosses are in charge of the economy. They’re breaking unions and skimping on overtime. They’ve been making boffo profits but they’re distributing them to their stockholders and executives. They may be hiring again, but the workers’ paychecks are still pretty thin.
Enter Massachusetts Senator Elizabeth Warren, backed by a crack team of economists, with a fresh look at the problem and a bold proposal: a wealth tax. Wealth taxes have a bad reputation. They are hard to administer and manpower-intensive. But Warren’s proposal is intriguing. She proposes a wealth tax of 2 percent that kicks in when a fortune passes $50 million, with a step-up to 3 percent on wealth over $1 billion.
That is a very narrow target—only about 75,000 to 80,000 households, ensuring that only the truly wealthy will be affected. That should simplify administration, although the wealth-tax examiners will have to be drawn from an elite corps. Experience in other countries also suggests that there should be no exempted assets, for it would be too easy for a smart lawyer to ring-fence whole classes of assets from the clutches of the taxman.