How To Eat the Rich

Public spending has more impact on inequality than taxation.

I’ve hit a dry spell in writing, so I thought I would post my most recent article for In These Times.

In every measurement of economic inequality, personal wealth is found to be more unequal than income. Naturally, this state of affairs invites attention and criticism, along with demands for a reduction of that inequality by various means, including to reduce the stubborn racial wealth gap. The latest World Wealth Report for 2024, published last month by The Capgemini Research Institute, brings this level of inequality into stark relief.

We learn from the report that very high net-worth individuals (“HNWI,” defined as those with at least $1 million of investable assets) have been doing quite well, which is probably not a surprise. Their numbers globally have grown from last year to nearly 23 million, and their wealth has grown to a staggering $87 trillion. (For comparison, in 2023, U.S. Gross Domestic Product was about $27 trillion.)

One million dollars is not actually very much in this world. Two veteran public school teachers or other public sector professionals who escaped misfortune and had the benefit of working and saving during the stock market boom after 1980 could have very well together accumulated $1 million. The report defines ​“ultra-high net worth” as those with $30 million or more, and the global population of this group grew by 5% while their wealth increased by nearly 4% to more than $29 trillion. The current Bloomberg index of the super-rich finds that 500 people each hold almost $6 billion or more.

You might think that growth in wealth is automatic for the richest people, but that isn’t necessarily so. Since much of their holdings can be tied up in volatile stock market shares, if not more exotic financial instruments, they can have down years too, and 2022 was one such year. It’s not mysterious. If the stock market tanks (as it did in October of 2022), those who own all the stock are the most affected, as far as financial net worth is concerned. Of course, they don’t face eviction or miss any meals.

The rise in wealth of the HNWI crowd in the United States is matched by the increase in their shares of total private wealth, as well naturally as the fall in shares for others. From the end of 2008 to 2023, the share of wealth held by the top tenth of one percent increased from 10.7% to 13.5%. (To be fair, the bottom 50% increased as well.)

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The concentration of all this wealth by the richest in society makes the case for a common refrain on the Left: Let’s redistribute it, presumably by taxation. That is an understandable (and moral response), but what I would call a fundamental socialist principle is that collective well-being supersedes the individual, and the greatest avenue for redistribution is through public expenditure, not tax policy reform.

In this context, we ought to reduce individuals’ dependence on personal income or wealth by having more needs served by social means.

People certainly need cash. The U.S. government won’t soon be delivering everyone’s preferred weekly basket of groceries. There will still be the water bill and trips to the gas station. To help subsidize the working class, policies that could go a long way include expanding Social Security as well as ideas like economist Darrick Hamilton’s negative income tax that would provide a direct cash benefit (or income floor) to those facing economic hardship.

Families shouldn’t have to carry the risks of catastrophic medical expenses but rather should be able to take advantage of public insurance that pools that risk, either through a single-payer system, as in Canada, or one where healthcare is simply available to all from public facilities and employees, as in Great Britain. A public commitment transforms healthcare from a household consumer burden into a right, what today is understood here thanks in large part to Bernie Sanders helping popularize the slogan ​“Medicare for All.”

There are two basic misconceptions about wealth on the U.S. Left. One is that the accumulation of wealth free of taxes deprives other worthy human needs of public resources. Another is that the taxation of wealth or income, as opposed to public expenditure, is vital in promoting greater equality.

Running the numbers, what becomes clear is that heavy taxation of wealth, plus the income of corporations, is insufficient to fill out the typical size of public budgets in social-democratic nations. For that you need something in the range of 35% of GDP. In the United States, the tax share for federal, state and local governments combined is well under 30%. Really-existing social-democracies usually rely on a broader tax base than the U.S. does, and not necessarily with an exclusive reliance on progressive taxation.