It is time for a wealth tax

In the “Gilded Age” of the 1890s, an ultra-rich elite dominated America economically and politically, with their fortresses of wealth effectively untouched by the tax system.

But things changed dramatically in the course of a few decades. The dogged efforts of dedicated reformers — workers, farmers, populists, progressives, academics — brought enormous political pressure that eventually led to the enactment of the U.S. income tax in 1913 (followed by a Canadian income tax in 1917), ushering in a world where governments came to serve the broader interests, not just the wealthy few.

Indeed, for about half a century, the U.S. had the distinction of leading the world — in taxing the rich (an example of American exceptionalism notably not celebrated last weekend).

Although scorned today, America’s robust taxation of the rich in the middle of the last century amounted to an astonishing achievement of popular democracy, with huge public benefits.

From about 1930 to 1980, “the United States was a beacon of tax justice. It was the democracy with perhaps the most steeply progressive system of taxation on the planet,” according to University of California economists Emmanuel Saez and Gabriel Zucman.

“In the 1930s, U.S. policymakers invented — and then for almost half a century applied — top marginal income tax rates of 90 per cent on the highest income earners. Corporate profits were taxed at 50 per cent; large estates at close to 80 per cent,” they note.

The revenue from those high taxes helped lift the country out of the Great Depression, financing massive New Deal spending on roads, bridges, hospitals and other public works, and, later in the 1950s and ‘60s, financing “the schools that made (Americans) productive and prosperous, funding public universities that are still, to this day, the envy of the world,” write Saez and Zucman in ”The Triumph of Injustice.”

However, since the 1980s, taxes on the rich have been deeply slashed, leaving today’s America resembling the Gilded Age, when the Rockefellers and Vanderbilts lived kingly lives in their ornate New York mansions.

But, as noted, the seemingly impenetrable walls protecting the mega-rich from taxation were ultimately breached, along with their dominance over society.

So it’s inspiring to recall how popular activism helped tear down those walls — and to envision a similar transformation today.

A backlash against today’s wealthy elite appears to be brewing — with the election of New York Mayor Zohran Mamdani on a platform of taxing the rich, and the California labour campaign’s success in collecting 1.5 million signatures to get a statewide billionaire wealth tax on the ballot next November. A national wealth tax could well be part of the 2028 Democratic platform.

Of course, billionaires threaten to leave if a wealth tax is imposed.

There they go again. Back in the 1890s, similar threats by the rich against the income tax prompted the great orator William Jennings Bryan to roar in Congress: “Let them depart! And as they leave without regret the land of their birth, let them go with the poet’s curse ringing in their ears!”

Along with the poet’s curse, today’s departing billionaires would also face an exit tax, which requires them, upon leaving their country, to pay tax on all their unrealized capital gains (in Canada as well as the U.S.).

Just as the U.S. badly needed an income tax in the last century, today the U.S. (and Canada) also need a wealth tax on the super-rich.

A Canadian wealth tax could constrain the growth of billionaire wealth — and raise $40 billion a year.

So let’s follow in the footsteps of the bold reformers of the Gilded Age who struggled against seemingly impossible odds — and eventually prevailed, transforming the world.

This article was originally published in the Toronto Star.