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What would you do to fix wealth inequality in the United States?

In our video, our researchers suggest one possible solution to bridge the gap between the wealthiest 10 percent of Americans and the average American family. There are many other solutions – what’s yours? 

Complete the form to share your thoughts with us.

Would Wealth Taxation be Sufficient? Evidence from a Dynamic Counterfactual Historical Simulation

Wealth stratification in the United States has risen to heights not seen since the Great Depression. Since 1989, the share of total wealth owned by the top 1 and 10 percent has risen by roughly 10 percentage points. As stratification has grown, policy proposals to address it have multiplied, with a principal proposal being the introduction of a highly progressive wealth tax. During their 2020 presidential campaigns, both Senators Bernie Sanders and Elizabeth Warren called for the introduction of a wealth tax of on average 2.5 and 4.5 percent on the top 99.8th and 99.9th ­percentiles, respectively, of the wealth distribution.

Via counterfactual historical simulation, this paper asks whether these wealth tax proposals would have been sufficient to

  1. curb rising stratification since 1989 and
  2. bring levels of wealth inequality in line with peer high-income countries (using France as the reference country).

To both of these questions, this simulation answers with a resounding ‘no.’ Rather, this paper shows that a much more aggressive wealth tax since 1989 – in terms of both tax rate and share of the distribution taxed – would have been required to stymie wealth concentration at the top and an even more radical wealth tax regime would have been required to bring wealth inequality close to levels seen in France, i.e., the peer country referent. These results strongly suggests that for the US to tend towards greater equality in the future, a much more radical wealth tax would be needed than the leading programs called for thus far.

Additional Resources

Check out the list of recommended readings to learn more about possible solutions and approaches to addressing wealth inequality.

Wealth Inequality and its Consequences
Wealth Redistribution Schemes: Wealth Taxation
Wealth Redistribution Schemes: Inheritance Taxation
Wealth Redistribution Schemes: Universal Capital Endowment
Wealth Redistribution Schemes: Baby Bonds
Wealth Redistribution Schemes: Reparations

If you have any questions or comments, please contact WealthInequality@umich.edu.

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