How to Tax a Billionaire – Mother Jones

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This November, California voters will weigh what could become America’s first-ever tax on net worth. The Billionaire Tax Act, a ballot initiative put forth by health workers after President Donald Trump blew holes in the state Medicaid budget, would impose a one-time tax of 5 percent on personal wealth exceeding $1 billion. With polls indicating majority support, tech oligarchs have threatened an exodus and crafted competing measures, bankrolling them to the tune of at least $118 million—of which $82 million came from Google’s Sergey Brin, according to the Associated Press.

On the other side is University of ­California, Berkeley, law professor Brian Galle, who helped write the initiative, along with several other, federal, efforts to tax the obscenely rich. These bills seldom go anywhere, even though ordinary Americans would very much like their government to do just that, as a 2024 report from the amusingly named ­Excessive Wealth Disorder Institute made clear.

The nonprofit examined 56 national and state polls on specific redistributive proposals and found majority support for most. People favored surtaxes on incomes over a million bucks, and for the rich to pay at least the rate on their investment gains as workers pay on their wages. They also wanted Congress to kill intergenerational dynasty trusts that grow, untaxed, in perpetuity, and they favored a dramatic reduction in the gift and estate tax exemption—now $30 million—which is the amount of money a superwealthy couple can pass along to their heirs without paying a dime.

Direct wealth taxes were the most popular: Roughly two-thirds of respondents, including 51 percent of Republicans, favored the Ultra-Millionaire Tax Act first introduced in 2021 by Sen. ­Elizabeth Warren (D-Mass.) and again this year by Rep. Pramila Jayapal (D-Wash.). That bill places a 2 percent annual tax on net household assets exceeding $50 million and 3 percent on those over $1 billion. Similar bipartisan support went to proposals from Sen. Ron Wyden (D-Ore.), Rep. Steve Cohen (D-Tenn.), and others that would tax unrealized gains on billionaires’ unsold assets, paper profits the IRS currently won’t touch.

Nobody has managed to pass a federal tax on wealth, or on the unrealized gains that represent the majority of income for the very rich.

That these bills have not come close to passing hasn’t stopped new proposals like the Oligarch Act, reintroduced in 2025 by Rep. Summer Lee (D-Pa.), which puts a 2 percent tax on wealth exceeding 1,000 times the national household median, rising to 8 percent on assets over a million times the median. (Only five families qualify, its author assured me.) In March, Sen. Bernie Sanders (I-Vt.) and Rep. Ro Khanna (D-Calif.) introduced the Make Billionaires Pay Their Fair Share Act, a 5 percent annual tax on net household assets exceeding $1 billion.

The challenge with any federal wealth tax, as Galle explains to me over chocolate-infused green tea at an Oakland cafe, is not just overcoming well-heeled opposition, but passing constitutional muster. Even the income tax as we know it wasn’t allowed until the 1913 ratification of the 16th Amendment. Before then, it was—as any federal tax on wealth would almost certainly be deemed by the Supreme Court—a “direct tax,” which the Constitution says is subject to “apportionment.”

To impose a direct tax, in other words, lawmakers would first have to decide how much money they wanted to collect, and then direct each state to raise its share of the total according to its share of the nation’s population—not its billionaire population. It was unworkable even in the 1800s. As Galle put it: “A direct tax at the national level has to ride in on a unicorn.”

But no unicorn is needed at the state level, where the Constitution’s direct tax rule does not apply. In fact, every state already taxes wealth by way of property taxes, though even those favor the rich: Most of a middle-class homeowner’s assets tend to be tied up in their primary residence, whereas a very rich family’s home usually accounts for a small fraction.

DC and seven states have passed so-called millionaire taxes, the latest being Washington, which enacted a law that will charge zero tax on incomes up to $1 million, but 9.9 percent on each additional penny. Rep. Don Beyer (D-Va.) and Sen. Chris Van Hollen (D-Md.) introduced a federal version in March.

Alas, such taxes don’t touch unrealized investment income—an exemption that enables America’s richest to dodge income tax almost entirely via an infuriating tactic known as “buy, borrow, die.” Rather than sell stock for money to live on, ultrawealthy investors simply take out low-interest loans against their assets. When they die, thanks to a legal...