Adobe Images Americans are deeply divided on many issues. But taxing billionaires isn’t one of them.
Polls consistently show broad support for raising taxes on the wealthy. Eighty percent of Americans worry about the rise in economic inequality and believe the ultra-rich exercise too much political power. Yet efforts to raise taxes on the richest Americans have made little headway.
The continued debate over taxing the wealthy raises a broader question: Can democratic institutions respond to legitimate concerns about fundamental fairness when a small but extraordinarily wealthy group believes its interests are threatened?
With $55 trillion in assets, the richest 1 percent owns almost one-third of the country’s wealth — about the same as the bottom 90 percent. That gap, which far exceeds that of other developed economies, is the largest it has been since the Federal Reserve began tracking Americans’ wealth in 1989.
Reform efforts have been stymied by the nature of our tax system and the political influence that accompanies concentrated wealth. Reformers confront a hostile White House and Congress, and a flat tax race to the bottom in many red states.
In the U.S. (and most of the rest of the world), taxes are typically levied only on income and realized gains. Assets that increase in value, including stocks, are not taxed unless they are sold. Because the super-rich hold about 80 percent of their wealth in appreciated assets, they do not pay their fair share.
Between 2014 and 2018, the collective net worth of the wealthiest 25 individuals in the U.S. increased by $401 billion. Over those five years, their effective tax rate was about 3.4 percent. During the same period, the rate paid by households with median incomes of $70,00 was about 14 percent.
Leona Helmsley, a hotel magnate convicted of tax-related crimes in 1989, reportedly told her housekeeper, “We don’t pay taxes. Taxes are what the little people pay.” These days, the wealthiest Americans may be more circumspect, but they are even more determined to use their financial and political clout to keep it that way.
In 2000, billionaires spent $18 million on U.S. elections, 0.6 percent of all contributions; in 2024, 100 billionaire families spent $2.6 billion, more than 16 percent of all contributions.
That spending has paid off. In 2025, the Trump administration’s “One Big Beautiful Bill” cut taxes for the wealthiest 1 percent of Americans by more than $1 trillion over 10 years.
Understandably, advocates of tax reform have concentrated their efforts on friendly state governments, but there, too, power and money matter.
California is currently home to more than 200 billionaires, by far the most in any state. Their wealth increased by 41 percent in 2023, 41 percent in 2024 and 30 percent in 2025. Yet their state income taxes in 2025 were only about 0.2 percent of their $2 trillion net worth.
A coalition led by the SEIU–United Healthcare Workers West proposed a ballot initiative that would impose a one-time 5 percent tax over five years on the total net worth of billionaires who were tax residents of California in 2025. The revenue would be spent on healthcare, public schools and food assistance.
A majority of Californians support the initiative. Gov. Gavin Newsom (D), who is considering a run for president, agrees that the ultra-rich should do more to fund the public services and infrastructure that helped make their fortunes possible. But he warns that if the state initiative passes, billionaires will flee California and take their businesses with them. And, indeed, six high-profile billionaires did leave last year.
The effect of the proposed wealth tax is hotly debated. Supporters claim it will raise $100 billion, while critics insist it will leave the state poorer by about $25 billion. The state’s nonpartisan Legislative Analyst Office predicts a one-time revenue increase of tens of billions, offset by an ongoing loss of hundreds of millions or more annually in income taxes and tens of millions in administrative costs. Proponents respond that even if every billionaire decamped tomorrow, it would take 25 years for the state to lose the amount it stands to gain.
Many blue states, including Maine, Maryland, Washington and New Jersey, have recently raised taxes on wealthy residents through a combination of surtaxes and higher brackets. But reform efforts in Michigan broke down because of “strong headwinds from billionaires.” Similar efforts have also stalled in Illinois, Connecticut and Vermont.
Zohran Mamdani, the mayor of New York City, urged the state legislature to raise income tax rates on the city’s millionaires. But Gov. Kathy Hochul, a Democrat running for reelection in November, opposed the increase, and the legislature, which is dominated by Democrats, did not include it in this year’s budget.
No state has yet passed a tax on residents’ total net worth, which (in addition to the risk of capital flight) requires complicated asset valuations and invites legal challenges.
Blue-state Democrats are in a bind. They support a more equitable tax system, but fear, with some justification, that they and their party will be blamed if higher state taxes cause their wealthiest residents and their state economies to “head south,” literally and figuratively.
So we are not surprised that a substantial majority of bettors on prediction markets believe California’s wealth tax on billionaires will not pass in November.
David Wippman is emeritus president of Hamilton College. Glenn C. Altschuler is The Thomas and Dorothy Litwin Emeritus Professor of American Studies at Cornell University.
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