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Taxes are due next Wednesday in the US, and while you put those finishing touches on your filing, many states are weighing what the future of taxes might look like for the country's wealthiest. California is weighing a ballot initiative to impose a one time well tax on residents worth
one point one billion dollars or more. Massachusetts Senator Elizabeth Warren and Vermont Senator Bernie Sanders are pushing for new taxes on ultra millionaires and billionaires at the federal level, and New York City mayors or on Momdannie one on a promise to tax the wealthy two.
And ultimately, the reason I want to increase these taxes on the top one percent the most profitable corporations is to increase quality of life for everyone.
But the battle over whether and how to do this is pretty heated. Some of the people who'd be impacted argue that more taxes will stifle innovation, that they'll be forced to move.
New Yorkers are going to flee. They're going to flee New York because of Zorod Mom Dannie.
California is ultra rich, are threatening to leave the state over a proposed billionaire tax.
This debate gets incredibly emotional, incredibly quickly.
London based Bloomberg reporter Charlie Wells has been covering the worldwide movement to tax the rich from across the Atlantic, where European countries from the UK to France have been weighing similar proposals too.
I always kind of think taxes are supposed to be boring, right, like it's just policy. But this speaks to how money really is a representation of power.
So at a time when the US government has cut taxes on the nation's highest earners, it's the state of the push to do the opposite. And how have passed government's attempts to do this succeeded or failed. I'm Sarah Holder, and this is the big take from Bloomberg News Today. On the show, we unpacked the growing hotly debated push to tax the rich more, How could it work? Where
has it happened before? And we take a closer look at New York City where Mayor Mom Dannie is fighting an uphill battle to tax the wealthy and pay for his campaign promises, Charlie, when we hear calls to tax the rich, there are a few ways we can interpret that. Right, Let's just start by defining those aren't the rich already taxed?
If I were going to give people one takeaway in this whole debate about wealth taxes, about policy changes, it's to just remember that there are roughly three different ways that governments throughout time have taxed people. Right, So it's been on wealth, which is kind of what's in the news. It's been on income, and then it's been on consumption.
Income taxes like the kind that come out of your paycheck, and consumption taxes like sales taxes, have their limitations. They collect levies on salaries, shopping or dining, but not on accumulated wealth like people's assets.
What wealth tax advocates are saying is, hey, look, you know, income tax policy really isn't working. We need to tax the value of the assets that these people hold beyond income.
Right, Wealthy people don't always make their money from traditional salaries. They may hold stocks, which can appreciate in value over time, or they may hold on to physical assets which are typically only taxed when they're sold, and.
So valuing the properties, you know, maybe giving a break for a primary residence, looking at secondary, tertiary and beyond residences, looking at financial assets, looking at art, looking at wine collections, and then taxing that.
The idea is to tax the value of these assets, because those assets, financial or otherwise are what can really help wealthy individuals get wealthier.
These super wealthy people are basically able to say, you know what, I've got all these assets, I'm going to borrow against them for a really long time. So I'm not going to bring in a big income, and I'm going to borrow against these assets that i have, keep my tax right low, and then just pass those on to you know, my errors.
For many generations, that's contributed to a wealth gap between the richest people and everyone else, a gap that in the US is only growing.
So this group of economists at Berkeley took a look at the accumulative assets of the four hundred richest American households in the United States teteen eighty two. Those families are a cumula of assets made up two percent of GDP. Now it's twenty percent. So you see this you see this big increase, right, four hundred of the richest families. Those families, over that time, they've had an increase in
wealth of about seven point five percent a year. You think about income growth for the average American one point five percent of a year. So that's a part of it, right, It's this kind of growth in inequality, right, a small number of people holding this big amount of assets.
As inequality widens, there's been a debate over how and whether the government should be capturing more of that wealth through taxation.
So this group of economists at Berkeley, the same group, they looked at effective tax rates, right, so the amount of tax that these really wealthy people pay. And what they found is that the effective tax of the top one hundred households in the United States was about twenty two percent on average. Compare that even to the top
tax rate for people in the top income bracket. Right, So someone who might be making like five hundred thousand dollars a year, they're working at a bank, they're working incredibly hard, their tax rate is forty five percent, right, So these incredibly wealthy people twenty two percent. People who are working a lot, who are getting their money through income forty five percent, and then for the entire population on average, it's about thirty percent.
It's a pretty stark divide, and that imbalance exists in other countries too, So increasingly around the world there's been momentum around designing tax policy to account not only for income but for assets. Norway, Switzerland, and Spain all levy taxes on citizens whose wealth is valued over a certain threshold. Some have done it for centuries. The Netherlands has its
own levee that effectively works as a wealth tax. The US has never had a federal wealth tax, but at the local level, lawmakers across the country have been pushing for them, and so.
There have been a number of proposals in Europe, in the United States, and number of states that say, hey, look, let's take the value of wealth tax that you know at a low percentage point, say two percent. You've had calls for a global tax. This is from Gabrielle Zuckman, the French economist, saying we need a global two percent
tax on wealth, not just income. We also have a call in California that's been really getting a lot of attention, this ballot initiative for a one time five percent levy on assets of residents of California who have a net worth of one point one billion or more. So this push to look not just at income but to look at assets.
What are the goals of lawmakers and advocates who back these kinds of taxes. Is it only about raising revenue?
There are pressures that governments across the world face. Growth has slowed, interest rates are higher, we have populations living longer. There's a lot of pressure on government budgets. I would say, based on my reporting, that is the number one aim
is to close gaps. There also is this issue of perception, and a lot of the policy experts I talked to said that if you have this wide spread sense of unfairness in a system, there is a need in some way to rectify it or at least make people feel like it's being addressed.
Charlie says part of the reason some US states are so motivated to increase taxes on rich Americans is to offset recent federal tax cuts benefiting higher income earners that were extended and expanded last year. But actually implementing a wealth tax is easier said than done. France actually used to have a wealth tax in the nineteen nineties, so did about a dozen other countries. Over time, many of them were phased out because.
They just didn't bring in the sort of revenue that advocates hoped. And you know, one business school professor told me, basically, you know what, both sides here tend to overestimate the efficacy or the danger of wealth tax. You know, they never bring in a huge amount of revenue. The percentage that they take is usually you know, between one percent to about three percent. There's sort of a substitute for other taxes that maybe some of these countries don't have.
There are also challenges when it comes to calculating them.
There are administrative issues, right, so if you think about what a wealth tax is, you're tallying up the value of all the stuff that someone owns every year and then figuring out how much you're going to tax on that. Like that is a really big administrative challenge. And so it can sound really simple to say, oh, okay, all we got to do is two percent wealth tax around the world done. Making that happen is hard, it's expensive.
But the other big problem is rich people tend to hate them.
One of the most experienced tax advisors, I spoke with who helps wealthy people with their tax planning. What she said to me was which people have a lot of resources to lobby against the sort of thing.
That's what happened in the UK.
Britain is a really interesting case because it's sort of between Europe and the United States. So like the United States, it has never had a full on wealth tax, but it faces similar pressures that a lot of advanced economies have, that issue of slowing growth, that issue of a consumer understrain,
that issue of inequality. And over the past you know, two years roughly since the Labor government has come into power, there has been pressure on the government in the United Kingdom, at least in the Labor Party from the left flank of that party, to bring in something like a wealth tax, and that kind of mirrored some policy discussions that we
were also seeing in France. But in both countries these policies, at least right now, from the parties in power, have not come into place, and I think that's because there was a lot of debate. There were a lot of threats from incredibly wealthy people to leave, and I think the threat of departures has been very, very real and very very live in the UK, as you saw a lot of wealthy people either go to lower tax jurisdictions or threatened to go, And I think that really scared the.
Government, Charlie. How often do people actually leave? What is the data say about how these measures have played out over time.
A lot of these policies have not really been in place for really long enough to see what would actually happen. And I think that's in a lot of ways why a wealth tax in the modern era is such an experiment. And so there's some numbers coming out of Massachusetts where you didn't have a wealth tax, but you saw this four percent surcharge on people from twenty twenty three who had an income of over a million dollars, and what you saw was a big amount of you know, assets leaving,
but also a big amount of revenue coming in. Residents exiting Massachusetts took a net four point two billion dollars in adjusted gross and come with them in twenty twenty three. But then again, you can make another story here when you look at the Massachusetts government brought in more than six billion dollars in revenue from this policy, and so it's easy to kind of slice and dice I think another thing is people are always coming and going right.
Wealthy people are very mobile. There's also a lot of entries. There's a lot of re entries. It's really easy to hear one number and think that the sky is falling, but look at the other numbers, right, and I think we need that data over time. We don't have it yet.
After the break, we zoom in on one of the closest watched battles over a plan to raise taxes on high earners playing out in the richest city in the country.
I think we need to increase taxes on the top one percent by two percent. Why we need to raise the state's top corporate tax right to match that out of New Jersey, and in doing so, this would raise.
Nine New York City mayors or on. Mamdani was elected on a progressive platform that he pledged to pay for with higher taxes on higher earners and big corporations. But instead of pushing a wealth tax proposal like in Spain or California, trying to levy taxes on the wealth that lives in yachts or fine wine, Mam Donnie is focusing on boosting taxes on wealthier New Yorker's income. The plan has a lot of people riled up.
I would hazard a guess that part of the reason this is getting so much attention is because of the mayor himself.
Bloomberg reporter Laura Namias covers New York state and city politics.
He attracts incredible amount of attention, both good and bad, and so this idea is drawing even more criticism than it usually has.
Mam Donnie has proposed raising corporate taxes and increasing the tax rate on New Yorkers who make over a million dollars a year, And since he can't raise in or corporate taxes himself at the city level, he needs the state to act. That's proving difficult.
Previous millionaire tax income hikes have been proposed in response to economic downturns or like huge economic problems after the Great Recession amid the COVID pandemic. Those were the times when there was the most political support in Albany for
raising the taxes. And we're not technically in a downturn, So there's some concern about using this lever at a moment when it's not like of maximum importance, or is this the pull lever in case of emergency or should we just pull it whenever we feel like it.
Mam Donnie is facing pushback from Albany right now, where New York Governor Kathy Hokeel has resisted boosting the tax rate at all. The back and forth is an example of the political challenges that proposals to fund progressive measures with taxes on the wealthy can face.
Mayor Mom Donnie was elected on this platform of providing a couple of really bold campaign promises that were pretty expansive. Now he has said that he would take whatever money he could get to fund the programs. But after his election and this year, he announced that the city was facing a massive budget deficit, so he is agitating heavily for tax increases at the state level.
Mam Donnie has also offered a counter proposal, something he does have control over as mayor, raising property taxes across the board.
Faced with no other choice, the city would have to exercise the only revenue lever fully within our own control. We would have to raise property.
Taxes that would require city council approval. So far, Mamdannie's hardball at both the city and state level has hit political roadblocks. Hokl has continued to reiterate that she doesn't want to increase income taxes. Here she is speaking at a Politico summit in March.
What I want to make sure we are smart about is having a system in place where it's not just taxing for the sake of taxing, and being conscious of the facts that I need people who are high net worth to support the generous social programs that we want to have in our state.
She's facing a re election fight in November in a state that is not as blue as New York City is. Without her approval, it's very unlikely that a tax increase could go through. I mean, New York State has raised income taxes repeatedly. It's not a totally out there idea at all, and it pulls incredibly well. There's more than a simple majority support for raising income taxes on millionaires. And that's not like a new phenomenon either. For years and years, I think that that has been the case.
People support the idea of taxing the rich. It's just that there are a lot of taxes already.
I mean, from Mamdani's perspective, why focus on increasing income tax We've seen other proposals that are focused on taxing wealth.
I think he's not opposed to wealth taxes. It's just incredibly difficult to do in practice, and income taxes work in New York. It yields a tremendous amount of revenue. It's easier to catch. The state Tax Department is like notorious or lauded depending on where you're coming from for their ability to track people and track their residency and make sure that people are paying. But a wealth tax is just very difficult to do on a state level. Well.
One of the concerns that often comes up around these local or state level wealth tax proposals is that businesses or wealthy individuals will just leave rather than pay, which could lead to further economic strains. How is that dynamic potentially different in a city like New York, which has all of these other reasons that people move here and want to stay.
Actually shows that it's inconclusive. The last time that New York raised taxes on millionaires, it did not appear to lead to an exodus of rich people out of the state. The kind of people who can afford to live anywhere, It doesn't They're not that sensitive to changes in income taxes.
The data suggests more that people are leaving from more middle income brackets than from the very top, and that that is potentially likely because of housing prices, which is just another one of these cost pressures that people face. But what some detractors would say, and groups like the Citizen Budget Commission, which is sort of this non partisan budget watchdog that also opposes increasing income taxes, they would say that New York's share of the number of millionaires
in the country has shrunk compared to other states. New York State is so reliant on the income taxes from incredibly wealthy people that if a few people leave who are extraordinarily wealthy, that could have an impact on the state's bottom line, and they use that revenue to fund things that are just sort of baseline expenses like medicaid and school funding.
New York City has a deadline of June thirtieth to adopt a balanced budget. New York State's deadline was April first. They've blown past that, but the budget is expected to be done in the coming weeks, and regardless of where they land on Mamdani's hoped for tax changes and how other proposals across the country shakeout, Bloomberg's Charlie Wells reminds us that in the US and in the UK, even the concept of income taxes for anyone was an experiment once upon a time.
There's incredible debate on whether or not it was even appropriate to tax income. There were a lot of concerns that the government asking people how much money they made was this huge invasion of privacy. There were kind of national debates about this. So this incredible kind of push pull something that now feels very normal, It feels very
not controversial. There's a world where the changes that we're seeing in the economy, the changes that we're seeing and tax policy kind of have that kind of influence on a wealth tax.
This is the Big Take from Bloomberg News. I'm Sarah Holder. To get more from The Big Take and unlimited access to all of Bloomberg dot com, subscribe today at Bloomberg dot com slash podcast Offer. If you liked this episode, make sure to subscribe and review The Big Take wherever you listen to podcasts. It helps people find the show. Thanks for listening. We'll be back tomorrow.