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

by Asher Dvir-Djarassi, Stone Center for Inequality Dynamics Student Fellow, Doctoral Candidate, Sociology and Public Policy, University of Michigan 


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.

Methods and Data

This simulation uses family net worth estimates from the Survey of Consumer Finances (SCF) supplemented by data on the Forbes 400 in order to cover families intentionally excluded from the SCF (see Saez and Zucman 2019). The SCF is a triennial survey covering every 3 years between 1989 and 2019, therefore inter-survey periods are interpolated when necessary. Tax thresholds are derived for each triennial survey year; for inter-survey years, threshold remain the same nominal value as the most recent previous survey year.

For each survey year, taxable wealth is determined using the observed wealth above the tax threshold (Eq 1). Post-tax taxable wealth in 1989 is estimated by applying the wealth tax to the sum of observed taxable wealth in that year (Eq 2). By inflating (deflating) aggregate post-tax wealth in 1989 by the observed annualized growth of taxable wealth between 1989 and 1992 (Eq 3), taxable wealth in 1990 (a non-SCF year) is simulated (Eq 4). Post-tax taxable wealth in 1990 is then estimated (Eq. 5) This process is repeated for 1991 (Eq 4 and 5).

Like all survey years, the wealth tax threshold for 1992 is adjusted to match the wealth threshold observed in the SCF+Forbes 400 (the tax threshold corresponds to percentile above which the tax is applied). Taxable wealth is recomputed (Eq 1), but now using simulated taxable wealth that incorporates the past application of the wealth tax. This procedure is repeated for all years until 2019. For each year, aggregate simulated post-tax wealth for the taxed quantile, q, is computed (Eq  6 and 7). In order to recover the full distribution, observed family wealth for non-taxed families is combined with the simulated post-tax wealth of the taxed quantile.

Israel Equations

Figure 1: Тор Shares of Total Wealth:

Figure 1

Notes: Both simulated wealth tax programs begin in 1989 and continue through 2019. Each subsequent year incorporates the reduction in the taxable wealth stock of the previous year. Tax thresholds are equal to the 99.8 and 99.9th percentiles, respectively, for the Warren and Sanders tax plans; thresholds are recalculated in each SCF survey year and thresholds are unaffected by the wealth tax program. Wealth tax rates are, respectively, 2.5 and 4.5% under the Warren and Sanders plans.

Source: Survey of Consumer Finances (SCF) supplemented by the Forbes 400 for US wealth estimates; World Inequality Database (WID) for French wealth estimates.

Figure 2: Simulated Top 1% and 10% Post-Та Wealth Shares (2019):

Figure 2

Notes: This figure shows the simulated post-tax wealth shares of the top 1 and 10% after 30 years for a total of 30 different combinations of tax rates and thresholds. Policies A, B, and C differ with respect to the tax threshold, with Policy A taxing the top 0.1%, Policy B taxing the top 1%, and Policy C taxing the top 10%. The x-axis corresponds to the tax rate in all 30 years – ranging between 0% (i.e., observed wealth share) and 10%. The dashed vertical black lines refer to the Warren and Sanders proposed tax rates. As reference, the wealth shares of the top 1 and 10% in France in 2019 are represented by the dotted blue line.

Source: SCF+Forbes 400; WID.


Wealth stratification has risen to heights not seen in nearly a century. Recently, a chorus of scholars and policy makers have brought to light the sheer extent of wealth stratification in the US (e.g., Saez and Zucman 2016; Wolff 2017) and have offered proposals for its redress, with wealth taxation taking a leading place (Piketty 2014; Saez and Zucman 2019). In the US, wealth tax proposals by Senators Warren and Sanders have been among the most radical wealth tax programs offered. While these policies promise to curb wealth inequality, research that has evaluated these proposals has not estimated their potential longitudinal effects on the distribution of wealth (Saez and Zucman 2019; Li and Smith 2022).

Via a counterfactual historical simulation, this paper offers such an evaluation. The results presented here strongly suggest that a wealth tax like Warren or Sanders would not have curbed the rise in wealth inequality in the US since 1989, nor would it have brought levels of wealth inequality in line with peer high-income countries. To achieve these two ends, a US wealth tax would require a lower wealth tax threshold than Warren and Sanders proposed (e.g., on the 99th or 90th percentile, rather than merely on the top 0.1%). In order for the share of total wealth of the top 1 and 10% to match France after 30 years, annual effective tax rates would need to be around 4% on all wealth over the 90th percentile (roughly, an order of magnitude greater than the effective tax rates proposed by Warren and Sanders). In order for a wealth tax alone to put the US on a trajectory towards a level of wealth stratification seen 30 or 40 years and in line with peer high-income countries, that wealth tax would need to be aggressive and radical.


Li, Huaqun, and Karl Smith. Analysis of Sen. Warren and Sen. Sanders’ Wealth Tax Plans. Washington, DC: Tax Foundation, 2020.

Saez, Emmanuel, and Gabriel Zucman. “Wealth inequality in the United States since 1913: Evidence from capitalized income tax data.” The Quarterly Journal of Economics 131, no. 2 (2016): 519-578

Saez, Emmanuel, and Gabriel Zucman. “Progressive wealth taxation.” Brookings Papers on Economic Activity 2019, no. 2 (2019): 437-533.

Piketty, Thomas. Capital in the twenty-first century. Harvard University Press, 2014.

Wolff Edward N. 2017. A Century of Wealth in America. Cambridge, MA: Belknap.

World inequality Lab. 2019. World Inequality Database.


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