The Wealth Tax Must Die

The wealth tax is the ultimate zombie policy: It’s been tried, tested, and rejected across Europe, yet it has returned to the United States with renewed fervor, driven by the politics of envy disguised as justice. In some ways it’s a predictable response to out-of-control state budgets fueled by reckless spending at all levels of government and growing budget deficits.

Most recently, Washington State’s House passed a 9.9% tax on income over $1 million, and it is expected to be signed into law by the governor any day now. Governor Bob Ferguson argues that this will restore fairness and equality to working- and middle-class families. Up to this point, Washington State had not had any income tax. California was the first state to make this move in 2004, followed by New Jersey, New York, Minnesota, and Massachusetts. Washington, D.C., also imposes a high-earner bracket tax on millionaires. Maryland enacted a temporary 2008 wealth tax that expired in 2010, but it’s considering another. That tax was projected to bring in over $100 million, but Maryland soon realized that the number of people reporting incomes of one million dollars or more dropped precipitously. People respond to incentives, and Marylanders had been incentivized to avoid the new tax.

Taxes have existed for almost the entire history of organized civilization and can be found recorded on Sumerian tablets dating back to 2500 BC, which describe the payment as a “burden.” Hatred for taxes goes back just as far. To avoid poll taxes, labor taxes, merchant taxes, and duties, all of which were paid in kind (think livestock, beer, and grain) before the advent of coined money, ancient records show that people engaged in smuggling. They created fake sales records and bribed guards at city gates—anything to lower the tax burden. Today Americans widely hate taxes; two-thirds report that their taxes are too high and that they don’t get good value in return, calling them unfair. About half of those surveyed report preferring lower taxes, even if that meant fewer government services.

Attitudes toward the wealth tax are slightly different because, while most people hate their own tax burden, they also do not consider themselves rich, despite growing evidence to the contrary. According to Federal Reserve data, the average net worth of American households has passed the $1 million mark, rising 42% between 2019 and 2022. Another study found that, when measured in 1995 dollars, the number of millionaire households grew from 2.4 million in 1983 to 9.1 million in 2016; in other words, the number of millionaires tripled during that time. This does not mean that people are earning a million dollars per year in their salary but that their net worth is pushing them into millionaire status, still a good thing. Despite this, a recent study found that just 36% of those with $1 million in investable assets consider themselves wealthy. Moreover, another survey found that $2.3 million is the amount needed to feel wealthy. Americans are richer than they think but are rightly frustrated with how the government spends their money and often view the system as rigged, with favors and benefits for the wealthy.