A new joint report from Fight Inequality Alliance, Institute for Policy Studies, Oxfam, and Patriotic Millionaires details what can be funded by simply taxing the rich.
America’s billionaires have grown $2.1 trillion richer during the pandemic, their collective fortune skyrocketing by 70 percent — from just short of $3 trillion at the start of the COVID crisis on March 18, 2020, to over $5 trillion on October 15 of this year, according to Forbes data analyzed by Americans for Tax Fairness (ATF) and the Institute for Policy Studies Program on Inequality (IPS).
Not only did the wealth of U.S. billionaires grow, but so did their numbers: in March of last year, there were 614 Americans with 10-figure bank accounts. Today there are 745.
The $5 trillion in wealth now held by 745 billionaires is two-thirds more than the $3 trillion in wealth held by the bottom 50 percent of U.S. households estimated by the Federal Reserve Board.
The great good fortune of these billionaires over the past 19 months is even starker when contrasted with the devastating impact of coronavirus on working people. Almost 89 million Americans have lost jobs, over 44.9 million have been sickened by the virus, and over 724,000 have died from it.
To put this extraordinary wealth growth in perspective, the $2.1 trillion gain over 19 months by U.S. billionaires is equal to:
- 60 percent of the $3.5 trillion 10-year cost of President Biden’s Build Back Better plan.
- The entire $2.1 trillion in new revenues over 10 years approved by the House Ways and Means Committee to help pay for President Biden’s Build Back Better (BBB) investment plan.
Sixty-seven national organizations have sent a letter to Congress expressing concern that neither the Ways and Means committee plan nor President Biden’s plan will adequately tax billionaires. They recommend that Billionaires Income Tax (BIT) legislation under development by Sen. Ron Wyden, chairman of the Finance Committee be included in final BBB legislation. President Biden also supports this tax reform.
Most of these huge billionaires’ gains will go untaxed under current rules and will disappear entirely for tax purposes when they’re passed onto the next generation. Under Wyden’s BIT, billionaires will start paying taxes on their increased wealth each year just like workers pay taxes on their paychecks each year.
The tax will apply only to taxpayers whose wealth exceeds $1 billion: about 700 households. It will be assessed annually on tradable assets, such as stocks, where the value of the asset is known at the beginning and end of the year. For non-tradable assets, such as ownership in a business or real estate holdings, taxes will be deferred until the asset is sold.
Public support for the Billionaire Income Tax is very strong. When proposed as a way to pay for President Biden’s $3.5 trillion investment package, it increases support for that package by 20 to 40 points among voters in battleground districts and states.
Among the individual stories behind the big numbers:
- Elon Musk of Tesla and SpaceX fame is not only beating Jeff Bezos in space, he has rocketed past him in the billionaires club. Nineteen months ago, Bezos was nearly five times richer than Musk. Now, after a meteoric eight-fold increase in his wealth, Musk is worth $209 billion and Bezos $192 billion. Bezos’s wealth still grew by a very large 70 percent over the period.
- Google founders Sergei Brin and Larry Page are now worth $237 billion combined, a 137 percent increase from their combined wealth of $100 billion at the beginning of the pandemic.
- Nike head Phil Knight has nearly doubled his fortune from $29.5 billion to almost $58 billion. Maybe that’s in part because Nike didn’t pay a dime of federal income taxes in 2020 on its $2.9 billion in profits; and between 2018 and 2020 the corporation paid just a 3.3 percent tax rate on $9 billion in profits.
- MacKenzie Scott, former wife of Amazon founder Jeff Bezos, has seen her wealth increase by $19.5 billion, or 54 percent, since the pandemic began, even after giving away $8.6 billion of her wealth to charity.
Billionaires are Undertaxed
America’s billionaire bonanza demonstrates the structural flaws in our current economic and tax systems. President Biden and Democrats in Congress are trying to remedy by advancing a $3.5 trillion package of investments in working families and communities, paid for with fairer taxes on the rich and corporations.
On average, billionaires pay an effective federal income tax rate of about 8 percent when the increased value of their stock is counted, according to the White House. This is a lower rate than that paid by many middle-income taxpayers, including teachers, nurses, and firefighters.
Billionaires pay such low tax rates because:
- Most of their income comes from the increased value of their investments such as stocks, a business, or real estate, rather than a paycheck like most people, and they don’t have to pay taxes on that increased wealth unless they sell the assets. But the ultra-rich don’t need to sell assets. Instead, because of the size of their fortunes, they can borrow money at low rates from banks and live lavishly tax free.
- When they sell their assets they pay a top capital gains tax rate of 20 percent (plus a 3.8 percent net investment income tax, NIIT) — far below the current 37 percent (40.8 percent) top rate they would pay on an equivalent salary. This is why many ultra-rich pay a lower tax rate than people in the middle class.
According to ProPublica’s analysis of IRS data:
- Billionaires have paid no federal income taxes in some recent years, including Jeff Bezos, Elon Musk, Michael Bloomberg, and George Soros.
- The country’s 25 top billionaires paid a tax rate of just 3.4 percent on a $400 billion increase in their collective fortune between 2014-18.
Poll after poll shows that Americans of all political persuasions and by large majorities believe that the wealthy and big corporations need to start paying their fair share of taxes. A June poll by ALG Research and Hart Research shows 62 percent of voters support Biden’s proposed $4 trillion (at the time) investments in healthcare, childcare, education, clean energy, and more — paid for by higher taxes on the rich and corporations.
A Note on Data: We draw on data from Forbes research on billionaire wealth. Thanks to Kerry Dolan and her team. Why March 18? March 18, 2020 is used as the unofficial beginning of the coronavirus crisis because by then most federal and state economic restrictions responding to the virus were in place. March 18 was also the date that Forbes picked to measure billionaire wealth for the 2020 edition of its annual global billionaires’ report. PolitiFact has favorably reviewed this methodology. Check back for regular billionaire wealth updates.