UNIVERSITY OF CALIFORNIA, BERKELEY
EM M AN UE L SAEZ AND G AB RI EL Z UCM A N
PROF E S S O RS OF ECONOMIC S
530 EVANS HA L L #3 8 80
BERKE LEY C A 9 4 72 0 -3880
saez@ e con.berke ley.ed u
zucma n@b e rkel e y . e d u
September 22, 2019
Democracies become oligarchies when wealth is too concentrated. A
progressive wealth tax is the most direct policy tool to curb the growing
concentration of wealth in the United States. It can also restore tax progressivity at
the very top of the wealth distribution and raise sorely needed tax revenue to fund
the public good. Senator Sanders' very progressive wealth tax on the top 0.1%
wealthiest Americans is a crucial step in this direction. We estimate that Sanders’
wealth tax would raise $4.35 trillion over a decade and fully eliminate the gap
between wealth growth for billionaires and wealth growth for the middle class.
Combining progressive wealth taxation with policies to rebuild middle class wealth
is what the United States needs to ensure vibrant and equitable growth for the
future.
We have analyzed Senator Sanders’ proposal to impose a progressive annual
wealth tax on American households with net worth (sum of all assets net of debts)
above $32 million. The tax rate would start at 1% of net worth from $32 to $50
million, increase to 2% on net worth from $50 to $250 million, 3% from $250 to
$500 million, 4% from $500 million to $1 billion, 5% from $1 to $2.5 billion, 6%
from $2.5 to $5 billion, 7% from $5 to $10 billion, and 8% on wealth over $10 billion
(the brackets apply for married taxpayers and are halved for singles). The wealth
tax would have a comprehensive tax base with no exemptions and would be
vigorously enforced to keep tax evasion low.
We estimate that about 180,000 American households (about the top 0.1%)
would be liable for the wealth tax and that the tax would raise around $4.35 trillion
over the ten-year budget window 2019-2028. The wealth tax would raise
approximately 1.6% of GDP per year ($335 billion relative to a $21.5 trillion GDP in
2019).
The calculations are done combining the best available data sources for the
current US wealth distribution: the Survey of Consumer Finances from the Federal
Reserve Board, and the Distributional National Accounts recently created by Piketty,
Saez, and Zucman, which estimates wealth by capitalizing investment income from
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income tax returns,
1
and the Forbes 400 list of the richest 400 Americans. We
assume an evasion tax rate of 16%, which is achievable under the strong
enforcement mechanisms in the proposal. The underlying data and program making
the computations is posted online on our websites.
2
The Forbes 400 data show that the wealth of the richest 400 Americans has
grown at a rate of 6.6% per year from 1982 to 2018 (after adjusting for inflation).
This is 4.0 points above the growth of average real family wealth (2.6% per year)
during the same period. Eliminating this growth gap would require a substantial
wealth tax of at least 4 percent per year at the very top of the wealth distribution.
Under the Sanders wealth tax plan, the average wealth tax rate on billionaires would
be around 6% per year initially and fall slowly over time as the wealth of billionaires
and especially decabillionaires is eroded.
3
Therefore, the Sanders wealth tax plan
would entirely close the gap in wealth growth between billionaires and the average
American family. Paying 5% per year cuts wealth in half after 15 years relative a
situation with no wealth tax (mathematically, (1-.05)^15=.46). Therefore, the
Sanders wealth tax would reduce the wealth of the typical billionaire in half after 15
years relative to a situation with no wealth tax. This would substantially break up
the concentration of wealth and power of billionaires.
We estimate that if the Sanders wealth tax had been in place since 1982, the
wealth owned by the Forbes 400 richest Americans would be only 40% of what it is
today: Instead of having a wealth of $7.2 billion on average (in 2018), they would
have a wealth of $3.0 billion on average. The share of wealth owned by the Forbes
400 would not have exploded and would only be slightly higher than it was in the
early 1980s. The current top 15 wealthiest Americans would own $196 billion
(instead of the $943 billion they own in 2018).
Gabriel Zucman
Emmanuel Saez
1
Piketty, Thomas, Emmanuel Saez, and Gabriel Zucman, “Distributional National Accounts: Methods
and Estimates for the United States”, Quarterly Journal of Economics 133(2), 2018, 553-609. Data
online at http://gabriel-zucman.eu/usdina/
2
An interactive calculator is also available online at http://wealthtaxsimulator.org/simulator_app/
to allow users to explore wealth taxes. The simulator uses the same brackets for married and single
households. Applying the brackets for married taxpayers to all families, the simulator generates $324
billion in revenue (in 2019). With halved brackets for singles, our data show that tax revenue would
increase slightly by $11 billion to $335 billion (in 2019). The data (all from publicly available
sources) and program underlying our calculations are posted here.
3
Initially, the tax rate on billionaires would be 6.1% based on calculations made on the Forbes list of
608 American billionaires.
Addendum: Comparison of the Warren and Sanders wealth tax proposals
Elizabeth Warren proposed a wealth tax with a tax rate of 2% for wealth between
$50 million and $1 billion, and 3% above $1 billion (using the same brackets for
married and single taxpayers). The table below lists basic statistics on the two
wealth tax proposals by brackets. Our data show that the Warren wealth tax raises
$200 billion (in 2019) while the Sanders wealth tax raises $335 billion (in 2019).
4
Hence the Sanders tax raises $135 billion more (68% more) than the Warren wealth
tax.
4
The online simulator is available at http://wealthtaxsimulator.org/simulator_app/
and allows users to quickly assess the revenue impact of any graduated wealth tax. Note that the
simulator uses the same brackets for single and married taxpayers. We have also posted the
underlying data and program online here that allow to differentiate between married and single
taxpayers (and rebuild the exact table presented here). All the data comes from publicly available
sources. Note that the scoring of the Warren tax plan differs very slightly from the original scoring
that was based on averaging data from the SCF and the Distributional Accounts and an extrapolation
on the number of billionaires from the Forbes 400 data. The initial scoring came at $210 billion in
2019, and estimated that about 75,000 households would be liable.
Tax Brackets
Number of
taxpayers in
each bracket (in
2019)
Total reported
wealth ($ billion
in 2019) (with
16% evasion
rate)
Total tax paid
($ billion in 2019)
Average tax rate
= col (5)/col (4)
(1) (2) (3) (4) (5) (6)
A. Bernie Sanders Wealth Tax Plan
Listed thresholds below are for married taxpayers (thresholds halved for singles in Sanders plan)
$32 million-$50 million ($16m-25m for singles)
1% 101,551 3,664 6.0 0.2%
$50 million-$250 million (…) 2% 71,020 6,203 72.0 1.2%
$250 million-$500 million (...) 3% 6,094 1,747 35.2 2.0%
$500 million-$1 billion (…)
4% 2,519 1,568 43.6 2.8%
$1 billion-$2.5 billion (…)
5% 909 1,069 38.9 3.6%
$2.5 billion-$5 billion (…)
6% 203 649 30.7 4.7%
$5 billion-$10 billion (…)
7% 67 441 24.6 5.6%
$10 billion and over ($5b+ for singles) 8% 36 1,129 83.3 7.4%
All 182,399 16,470 334.4 2.0%
B. Elizabeth Warren Wealth Tax Plan
Same thresholds for married and single taxpayers
$50 million-$1 billion 2% 69,205 9,286 116.5 1.3%
$1 billion and over 3% 982 3,147 83.6 2.7%
All 70,187 12,433 200.1 1.6%
Basic Statistics on the Sanders and Warren Wealth Tax Plans
Notes: The table presents basic statistics on the Sanders (Panel A) and Warren (Panel B) wealth tax proposals. Column (1) lists the thresholds for each
bracket. In the Sanders plan, thresholds are halved for singles (hence the first bracket is $16m-$25m for singles instead of $32m-$50m for married, etc.).
Therefore, the number of taxpayers in the $50m-$1bn Warren bracket is not the same as the sum of taxpayers in the $50m to $1bn Sanders brackets.
Column (3) lists the number of taxpayers in each bracket. Col. (4) lists the total wealth of taxpayers in each bracket. Col. (5) lists the total wealth tax paid by
taxpayers in each bracket. Col. (6) lists the average wealth tax rate for taxpayers in each bracket (defined as col. (5) divided by col. (4)). The computations
assume that each wealthy family can hide 16% of its wealth through tax evasion and tax avoidance (which is a realistic number with strong enforcement as
laid out in the proposals). Therefore, the tax rate in col. (6) should be reduced by 16% to measure the tax burden relative to true wealth. The underlying
data combines the Distributional National Accounts data and the Survey of Consumer Finance data for 2016 (and aged to 2019) along with the Forbes list
of the richest 400 Americans in 2018. The underlying data and the program making the computations is posted online for users.
There are three differences between the Warren and the Sanders wealth taxes, two
small differences and a big one.
The first small difference is that the Sanders tax halves the brackets for single
taxpayers (relative to married taxpayers) while the Warren tax uses the same
brackets for singles and married. As mentioned above, the halving of the brackets
for singles increases the wealth tax revenue by $11 billion (in 2019), which accounts
for 8% of the $135 billion difference in revenue (in 2019) between the two plans.
The second small difference is that the Sanders wealth tax starts at $32
million with a tax rate of 1% before ramping up at 2% at $50 million while the
Warren wealth tax starts directly with a 2% rate at $50 million. This implies that the
Sanders tax applies to the richest 180,000 families (top .1%) while the Warren tax
applies to the richest 70,000 families (top .04%). This extra 1% tax bracket from
$32 million to $50 million raises only $19 billion in extra tax revenue (in 2019) and
hence accounts for only 14% of the $135 billion difference in revenue (in 2019)
between the two plans.
Hence, below the ultra rich, the Sanders and Warren plans are very similar.
The big difference is that the Sanders wealth tax applies a much more
progressive tax on the ultra rich (the top .005% or richest 8000 families with wealth
above $250 million) with graduated rates from 3% (starting at $250 million) up to
8% (above $10 billion). This extra progressivity raises an extra $106 billion (in
2019) and accounts for 78% of the $135 billion difference in revenue (in 2019)
between the two plans. This additional graduation can have a large impact on very
top fortunes in the long-run as we illustrate below drawing on our recent work
where we use the Forbes 400 data since 1982 to simulate the long-term impact of
wealth taxation on top fortunes.
5
The wealth tax erodes fortunes over time.
Billionaires still arise but under a wealth tax but they cannot stay billionaires (and
especially deca-billionaires) for as long.
The table below lists the name, source of wealth, and wealth in 2018 of the
top 15 richest Americans (Forbes magazine estimates). The last two columns depict
what their wealth would have been if the Warren wealth tax and the Sanders wealth
tax had been in place since 1982 (the tax thresholds apply in 2018 and are indexed
to the average wealth per family economy wide in prior years). Both taxes have a
strong impact in the long-run on top wealth holders. The richest 15 own $943
billion. Under the Warren tax, their wealth would be halved down to $434 billion.
Under the Sanders tax, their wealth would be halved twice down to $196 billion.
Under the Sanders tax, most decabillionaires would still be multi-billionaires but not
decabillionaires anymore.
5
Saez, Emmanuel and Gabriel Zucman “Progressive Wealth Taxation.” Brookings Papers of Economic
Activity, forthcoming Fall 2019, available here.
The figure below depicts the share of total wealth owned by the top 400
richest Americans since 1982 from Forbes magazine. The figure shows that the
share of wealth owned by the top 400 has exploded from about 1% in the early
1980s to about 3.3% in recent years. The figure also depicts what their wealth share
would have been if the Warren or Sanders wealth tax had been in place since 1982.
With the Warren wealth tax in place since 1982, the Forbes 400 wealth share would
have been 2.0% in 2018, substantially lower than the current 3.3% but still about
twice as high as in the early 1980s. With the Sanders wealth tax in place since 1982,
Current 2018
wealth ($
billions)
With Warren
wealth tax since
1982 (3% above
$1b)
With Sanders
wealth tax since
1982 (5% above
$1b graduated
to 8% above
$10b)
Top Wealth Holder Source
1. Jeff Bezos Amazon (founder) 160.0 86.8 43.0
2. Bill Gates Microsoft (founder) 97.0 36.4 9.9
3. Warren Buffett Berkshire Hathaway 88.3 29.6 8.2
4. Mark Zuckerberg
Facebook (founder) 61.0 44.2 28.6
5. Larry Ellison Oracle (founder) 58.4 23.5 8.5
6. Larry Page Google (founder) 53.8 35.3 19.5
7. David Koch Koch industries 53.5 18.9 8.0
8. Charles Koch Koch industries 53.5 18.9 8.0
9. Sergey Brin Google (founder) 52.4 34.4 19.0
10. Michael Bloomberg Bloomberg LP (founder) 51.8 24.2 11.3
11. Jim Walton Walmart (heir) 45.2 15.1 5.0
12. Rob Walton Walmart (heir) 44.9 15.0 5.0
13. Alice Walton Walmart (heir) 44.9 15.0 4.9
14. Steve Ballmer Microsoft (CEO) 42.3 18.2 7.5
15. Sheldon Adelson Las Vegas Sands (founder) 35.5 18.4 9.3
Total (top 15) 943 434 196
Long-term Effect of Wealth Taxation on Top 15 Wealth Holders
Notes: The table lists the name, source of wealth, and wealth in 2018 of the top 15 richest Americans (Forbes magazine
estimates). The last two columns show what their wealth would have been if the Warren wealth tax and the Sanders
wealth tax had been in place since 1982. The Warren wealth tax has a 2% marginal tax rate above $50 million and a 3%
marginal tax rate above $1 billion. The Sanders wealth tax has a 1% marginal tax rate above $32 million, 2% above
$50m, 3% above $250m, 4% above $500m, 5% above $1 billion, 6% above $2.5b, 7% above $5b, 8% above $10b. The
tax thresholds apply in 2018 and are indexed to the average wealth per family economy wide in prior years. The wealth
tax has a much larger cumulative effect on inherited and mature wealth than on new wealth.
the Forbes 400 wealth share would have been around 1.3% in 2018, much lower
than the current 3.5% and still slightly higher than in early 1980s.
Which of the Warren and Sanders wealth tax--or none at all--is preferable is
for the American people to decide. In this note, we wanted to lay out the facts so that
a well informed democratic debate can take place.
6
6
Interested readers can find a much longer discussion of the merits and demerits of progressive
taxation in our recent paper: Saez, Emmanuel and Gabriel Zucman “Progressive Wealth Taxation.”
Brookings Papers of Economic Activity, forthcoming Fall 2019, available here.
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
1982
1986
1990
1994
1998
2002
2006
2010
2014
2018
Forbes 400 wealth share (% of US wealth)
With Warren wealth tax (3%
rate above $1bn)
With Sanders wealth tax
(5% above $1bn graduated to
8% above $10bn)
Actual share of wealth
owned by the Forbes 400