Since the beginning of the COVID-19 crisis in March, over 45 million Americans have filed for unemployment. Millions of others who have kept their jobs have faced dangerous working conditions, cut hours, or slashed wages. Total household wealth has fallen by more than $6.5 trillion.
But throughout this unprecedented economic disaster, billionaires and corporate investors continue to get richer. Since March, the few hundred billionaires in the U.S. have seen their wealth increase by over 20%, or more than $550 billion. The S&P 500, which at one point looked poised for a substantial decline, has already rebounded to December 2019 levels, and is only a few percent below its all-time high.
In any crisis, it’s inevitable that some groups will end up doing better than others. But this extreme concentration of gain in the midst of widespread suffering is bad for all of us. Millions of taxpayers submit their returns on 2020’s delayed Tax Day, July 15, but we should consider how the federal government can use our tax code to address this problem. One solution? It could take a page out of its historical playbook and implement an excess profits tax similar to what the U.S. had in World Wars I and II.
During the First and Second World Wars, the U.S. government enacted a series of taxes intended to pull back some of the profits earned by companies that were making significantly more money thanks to the wars. These “war profiteering” taxes raised the tax rate on profits above a company’s average annual profit from the few years before the wars began. If a company earned $10 million in profit each year from 1936-39 and then jumped to $50 million right as WWII began, a substantial portion of that increase would be taxed at a higher rate than normal, sometimes up to 95%.
Just like our forefathers recognized that war profiteering should be limited, our current government should act to limit pandemic profiteering. Any company whose profits have dramatically increased this year, or any individual whose net worth has increased by a large amount, should be paying higher taxes this year.
The cutoff point for these increases should be relatively high. I have no interest in raising taxes on the owner of a small cleaning business who happens to be much busier than normal this year. We shouldn’t penalize someone for their retirement account slightly increasing in value over the last few months. But there’s no reason that Jeff Bezos, already the richest man in the world, should be able to see his wealth increase by over $50 billion and not be asked to give more. Anyone whose net wealth increases by over a billion dollars this year, or even a few hundred million, should be subject to a new tax.
Most of the increased wealth of the ultra-rich is in unrealized capital gains rather than income, but enacting a simple, targeted mark-to-market capital gains system, one that many tax experts already advocate for, would mean that they would be paying their fair share. Wealthy people like myself should view this as an opportunity to give back to the underprivileged and support these measures.
An excess profits tax isn’t meant to punish success. It’s a good thing that some people are doing well during this crisis. But at a time when millions are suffering because of circumstances out of their control, it seems eminently reasonable to ask those who have benefited from those same outside circumstances to give a bit more.
We’ve asked healthcare workers, small businesses, and essential workers to make sacrifices above and beyond what we normally expect, we can do the same with billionaires and investors in big corporations.
Morris Pearl is the chair of Patriotic Millionaires