Photograph by Nathaniel St. Clair
Many progressives have long pushed for a wealth tax to lessen some of the huge fortunes that have been built as a result of the rise in inequality over the last half-century. Regardless of the merits of a wealth tax, to many of us it seemed like an impossible political and even legal lift. It is unlikely that this Supreme Court would find it constitutional.
Thankfully, we didn’t have to elect a liberal president with majorities in Congress to impose a wealth tax. Donald Trump is doing it for us with his huge tariffs. The S&P 500 is down almost 18 percent from its post-inaugural peak in February and 14 percent from its pre-election level.
Most of the people who supported a wealth tax would have been happy with a 1-2 percent tax. Trump has effectively given us a tax ten times that size and we aren’t even one hundred days into his presidency.
From an economic standpoint, a drop in the stock market is actually very similar to a wealth tax, although it does hit people who are not wealthy. In a country that borrows and spends in its own currency, like the United States, the limit on a government’s ability to spend is not its tax revenue, it can always just print money. The limit is that if it spends too much it will cause inflation.
Taxes free up room for spending by taking money out of people’s pockets, thereby reducing their consumption. But a plunging stock market also takes money out of people’s pockets. This should leave more room for additional government spending without causing inflation.
Another reason for wanting wealth taxes is to reduce the political power of the wealthy. When the rich can freely contribute huge sums to political campaigns and buy news outlets and social media platforms to push their political agenda, it destroys democracy.
The stock market plunge works to lessen the ability of the rich and super-rich to gain political power in the same way that a wealth tax would, except it operates far more quickly. If we have a few more weeks like the week since “Liberation Day,” Elon Musk will have to pawn his chainsaw the next time he wants to buy an election.
This first appeared on Dean Baker’s Beat the Press blog.
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