When it comes to taxing the super rich, there’s no need to reinvent the wheel

Supporters hold signs advocating for the Billionaire Tax Now coalition in Los Angeles, California, on 27 April 2026. Photograph: Bloomberg/Getty Images View image in fullscreen Supporters hold signs advocating for the Billionaire Tax Now coalition in Los Angeles, California, on 27 April 2026. Photograph: Bloomberg/Getty Images Analysis When it comes to taxing the super rich, there’s no need to reinvent the wheel Eduardo Porter Any new tax on the rich won’t raise much money unless many of the exceptions and loopholes are dealt with In this new era of rampaging oligarchs, nothing may seem as satisfying as slapping a tax on Elon Musk ’s new trillion-dollar fortune. What most bothers Americans about federal taxes is that billionaires don’t pay their fair share . As the race to develop artificial intelligence mints more billionaires, policymakers’ temptation to directly tax their brobdingnagian wealth is becoming unbearable. The first state out of the blocks is California , where voters in November will decide whether to impose a one-time tax of 5% on fortunes worth more than $1bn. Given the ease with which plutocrats avoid paying income taxes , the case for this sort of direct tax on their stash appears unassailable. The US government needs money for all sorts of reasons, starting with the imperative to restore one of the rich world’s most meager social safety nets and do more to mitigate America’s mushrooming income inequality . Increasing demands on the safety net by an ageing population will require considerably more money. And the prospect of an AI-laced economy with little human income to tax argues for efforts to find other sources of revenue. As billionaires’ wealth soars, US workers struggle: ‘The rich keep getting richer for no good reason’ Read more And yet deploying a newfangled wealth tax that has been largely abandoned across the world’s industrialized nations could actually put at risk the prospect of building the more capable state the US needs, draining political capital that would be best used to restore the decimated array of taxes it already uses. Just consider that in 2024 the richest 1% of Americans paid, on average, about 31.5% of their income in federal taxes and about 7.2% in state and local taxes . That is more than eight percentage points less than what they paid at the turn of the century . Considering that the top 1% report a total adjusted gross income of over $3tn, those eight points could add up to nearly $300bn of additional tax revenue per year. Raising more money is not particularly complicated, from a technical perspective. Rather than taxing wealth or raising income tax rates sky-high, it can be done by closing the elaborate array of holes that have been drilled into the current tax schedule by offering preferential tax treatment to specific types of income, reducing at every step the plutocracy’s tax liability. A recent analysis from the Yale Budget lab finds that the effective tax rate on the top 1% of earners ca