The Truth about the Billionaires’ Income Tax

What do you think of the proposed billionaires’ income tax? Could it work in America, or is it just another socialist idea that will never happen here? I’m not sure. But there are a lot of good ideas to come out of socialism, and this might be one worth trying. Let’s take a look at what the proposal is and how it would work.

The main thrust of the idea is actually quite simple. In order to help those whose income falls below a certain level, the government would tax anything earned above $1 billion per year at 50 percent. The tax only applies to billionaires, so it wouldn’t affect most Americans at all. It’s not like they’re suggesting taxing everyone’s income! The logic behind it seems pretty straightforward. If you make over $1 billion per year (that’s the threshold, not the amount after which the tax is levied), then that means that you are doing just fine under capitalism. You can afford to pay half of your income in taxes and still be plenty well off. Meanwhile, if you’re making less than $1 billion, then it’s very difficult to survive at all under capitalism. Even if you’re making $20 million per year, that’s just barely enough to get by on in some places. So the idea is that billionaires are being taxed at half their income because they have plenty of money, while people are being given some help through government programs because they need the help.

This makes it seem like this idea should be very appealing to anyone who wants to see more support for low-income people, but less support for billionaires. If our goal is just fairness, then what’s wrong with that? Well, the problem is that there are several other pieces to this puzzle that no one has really talked about.

Right now, we’re assuming that the billionaires wouldn’t miss it and that it would be good to give people in need more money. But how much would we actually be giving them? If you tax someone at 50 percent of their income, then they only get half of what they were earning before. If they’re currently making $100 million per year, then that’s really only $50 million now, and their taxes would be $25 million per year. With that in mind, what could we do with just the money generated by taxing billionaires at half their income? We’d have to spend it on people who are currently making under $1 billion, but even if you could somehow hand out that much money to everyone, it wouldn’t change their lives very much.

For example, let’s say that you’re earning $20 million per year. With the billionaires’ tax, your income would effectively drop to $10 million. Then you’d get a check for $5 million from the government every year. But here’s the thing: if you’re already making $20 million, then an extra $5 million isn’t going to change your life that much. You’d still be rich enough that most people wouldn’t even consider you middle-class. We just can’t do a whole lot to improve anyone’s quality of life with the kind of money that would be generated by taxing billionaires at half their income.

Now, if you’re earning $20,000 per year, then an extra $5 million is probably going to change your life pretty drastically. Sure, $5 million isn’t enough for everyone wealthy to just buy a new Ferrari or something, but a check for that amount is going to make a huge difference in the lives of people who are working hard just to get by. Taking more from billionaires and giving it back to those at the bottom might have some appeal, but as an overall plan for redistributing wealth, taking half the income of billionaires is simply too little money relative to how much they actually make.

This is why many people who consider themselves socialists still focus their rhetoric on the need for the rich to pay more in taxes, rather than making it sound like everything would be paid for if we just taxed billionaires at half their income. The truth is that even if you took every penny of income above $1 billion per year, you’d only have enough money to give everyone else an extra $2,500 per year. You’d be taking away the fortunes of billionaires and millionaires, but that just wouldn’t generate nearly as much money as people seem to think it would.