As Democrats begin the push to invest $3.5 trillion to combat climate change, expand Medicare, ensure child care for working families and more, the age-old question is being repeated in Congress and the media: How are you going to pay for that?
If working families were treading water before, the pandemic pushed their heads underwater. Nearly one third of lower-income Americans say their financial situation has worsened since the pandemic began. Today, more than 11 million people are behind on rent, and 20 million are not getting enough to eat. Record numbers are resorting to grocery shopping at dollar stores.
Meanwhile, over the course of the pandemic, the world’s billionaires have amassed a jaw-dropping $5.5 trillion. While millions of front-line workers risked their lives on the job in 2020, the average S&P 500 company’s chief executive made a staggering 299 times more than their workers.
This disparity accelerated a decades-long trend: Since the 1970s, the wealthiest 0.1 percent of Americans has tripled its share of total household wealth. Even before the pandemic, studies showed the United States’ inequality gap could well be one of the largest on the planet.
Such extreme inequality can be disastrous for societies. Chuck Collins, who leads research on inequality at the Institute for Policy Studies, says, “As we divide into affluent and poor enclaves, people’s sense that they share a common destiny withers, replaced by fear, misunderstanding, and class and racial antagonisms.” U.N. research found inequality of this scale can destabilize democracies, creating the conditions for authoritarianism to spread. (And that report came out before the 2020 election became Exhibit A.)
A pandemic-profits tax may sound extreme to some, but there’s plenty of precedent for taxes like this in the wake of major disasters. France, Japan and other nations used one-off wealth taxes to fund post-World War II reconstruction, and more recently, Ireland and Iceland instituted temporary wealth taxes after the 2008 recession. The United States, too, has relied on sharp tax increases on the wealthiest in times of crisis: The War Revenue Act passed during World War I brought the top tax rate from 15 percent to 67 percent. During World War II, the rate reached 94 percent, with Franklin D. Roosevelt even proposing a top rate of 100 percent.
A temporary tax bump would not by itself reduce the trend of mounting inequality. But it could help pave the way for more lasting, structural changes. The Tax Excessive CEO Pay Act, introduced by Sen. Bernie Sanders (I-Vt.), would tax companies that pay CEOs at least 50 times more than their workers. Tax policy expert Sarah Anderson notes that this tax could actually benefit these companies’ bottom lines, as wide CEO-worker pay disparities damage employee morale, increase turnover and decrease sales. Plus, the majority of Democrats and Republicans support a cap on CEO pay.
We should also consider permanently raising the top marginal tax rate. Remember, though today we quibble over fluctuations between 37 percent and 39 percent, the top marginal tax rate remained over 90 percent for decades after World War II while the middle class flourished. Simultaneously, we’ll need to increase Internal Revenue Service enforcement and strengthen programs such as the Foreign Account Tax Compliance Act so that the wealthiest individuals and corporations actually pay their fair share and don’t exploit the system. With the revenue these policies would raise, we can invest in building a fairer, more humane, more sustainable economy.
Ultimately, extreme inequality exposes a simple fact: So much of the suffering in our communities is not inevitable, but a choice. With our society’s resources, we can choose to build a world where parents aren’t going to sleep on empty stomachs so their kids have enough to eat, where desperate people aren’t forced to set up tents on our streets and where families going through a medical emergency don’t have to suffer through a financial emergency as well.
And even in that world, billionaires could still afford to leave on a rocket.