Public opinion and certain presidential candidates are in favor of taxing the wealthy–but that doesn’t necessarily mean it will happen.
Everybody in the US–from Elizabeth Warren and Bernie Sanders to billionaires George Soros and Warren Buffet–appears to want higher taxes on wealth.
Democratic presidential candidate Warren has argued for a 2% tax on family fortunes above $50m. Rival candidate Sanders, another top contender, is pushing for his own tax on “extreme wealth.”
Surprisingly for some, billionaire business moguls, such as George Soros, Warren Buffett, Eli Broad, and Marc Benioff, have also come out in support of higher taxes on the super rich.
Even US President Donald Trump has spoken about the need to close tax loopholes for the wealthy.
The issue has been pushed to the forefront by economic research citing rising income inequality, stagnant upward mobility, and data which shows that the richest 400 Americans now pay lower taxes than any other income group.
Higher taxes would seem inevitable–but are they?
The US central bank estimates that the top 1% of US households hold about 39% of the country’s wealth, a term that includes assets such as property.
The top 1% also account for about 13% of income, after taxes and other deductions, according to a 2016 Congressional Budget Office analysis.
Headlines concerning how some wealthy individuals have avoided paying their taxes in full have only added to the anger.
Almost two-thirds of Americans told Pew Research Center this year that the feeling some corporations and the wealthy don’t pay their fair share of taxes upsets them “a lot.”
The discontent is especially deep among Democrats, who were outraged when Republicans cut rates for the wealthy and corporations as part of a $1.5 trillion tax cut in 2017. Yet even a viewer poll from Fox News–a network known for its conservative leanings–found that 70% of voters favored tax hikes on families making more than $10m a year.
As anger over the economic divide increases, the American business class, traditionally a staunch defender of low-tax regimes, has also started to change its perspective–at least publicly.
This summer, a major business group declared that companies’ interests should go beyond financial stakeholders to include employees and local communities.
Even outspoken figures on Wall Street have argued that reform of capitalism is necessary to prevent the situation from getting worse.
Yet analysts remain unconvinced. Andrea Louise Campbell, a political science professor at MIT, who is working on a book about American attitudes toward taxation, told the BBC that although Americans tell pollsters they favor higher taxes on the wealthy, they typically back high rates on annual income but not, for example, on inheritances.
Furthermore, despite the heavy media focus, evidence suggests that reducing inequality often ranks low on the list of voter priorities with fewer than 3% identifying it as the top problem in Gallup surveys.
“It is certainly the case that income inequality has increased and many Americans are aware of that and are unhappy with the trend, but translating that into a desire for redistributive taxing and spending policies is more difficult,” Campbell said.
A few celebrity billionaires notwithstanding, polls also show that the rich tend to be anti-tax.
There is even a divide among Democrats, as many moderates stop short of supporting the kind of wealth tax–covering items such as property, yachts and art in addition to income–that is backed by the likes of Elizabeth Warren and Bernie Sanders.
What’s more, draconian wealth taxes would almost certainly face a legal challenge over whether they meet the criteria laid out in the US constitution for what the federal government is allowed to tax.
“The role of public opinion in setting taxes is relatively modest,” Campbell told the BBC. “Even if ordinary Americans on average would like increased taxes on high income, high wealth people, I don’t think they’re the ones with influence on policymakers.”