January 18, 2023
January 18, 2023
Lawmakers in seven states will introduce legislation this week to tax wealth in a new coordinated effort to combat ever-increasing income and wealth inequality. As the right-leaning Tax Foundation recently put it: “wealth taxes are back in a big way.” The bills couldn’t come at a better time, as those at the very top continue to pull apart from the rest of us and far too many states contemplate piling on to this runaway inequality with seemingly endless tax cuts for those at the top.
Creative wealth tax proposals will move forward in California, Connecticut, Hawaii, Illinois, Maryland, New York, and Washington – and other states may be joining the list soon. The legislation runs the gamut of possible wealth taxes, from strengthening estate taxes (in Hawaii, Maryland, and New York) to taxing income from realized capital gains (in Connecticut, Hawaii, Maryland, and New York) to taxing wealth held in unrealized capital gains (in California, Illinois, New York, and Washington).
These seven states are ripe targets for wealth taxes because, as we detailed in our October report on the geographic distribution of extreme wealth, they have an outsized share of extreme wealth – which we define as household wealth over $30 million. In all, these states hold 47.8 percent of nationwide wealth over $30 million while making up just 27.3 percent of the population.
Taxing wealth in these states and others, or at the national level, would combat runaway inequality and advance racial justice:
- Nationally, 30 percent of wealth (totaling $39 trillion in 2022) is held by the 0.25 percent of households with total wealth over $30 million.
- White, non-Hispanic families hold 86 percent of this nation’s wealth, while Black, non-Hispanic families own just 3 percent, according to our analysis.
- White, non-Hispanic families hold 92 percent of extreme wealth (the wealth held by families with net worth over $30 million). (This is likely an understatement because our dataset does not include the 400 wealthiest families.)
- White, non-Hispanic families hold the vast majority of unrealized capital gains as well – 89 percent of all unrealized gains above $2 million per household. Just 1 percent of those gains are held by Black families and less than 1 percent are held by Hispanic families.
Federal and state tax codes have helped to create this alarming level of inequality by taxing income from wealth less than income from work. Measures to tax extreme wealth, like these new state bills, would lessen these extreme levels of economic and racial inequality. And by generating new revenues to put toward making college and preschool affordable, strengthening our infrastructure and patching holes in the safety net, they also bring a real opportunity to ensure that families who don’t come from wealth have a better shot at an economically secure future.