Do We Need Student Loans For Billionaires?

By Sam Pizzigati Polly Toynbee, a commentator for Britains Guardian newspaper, plays a role quite similar to Paul Krugman, the Nobel Prize-winning economist who doubles as a New York Times columnist. Both regularly advance well-reasoned and even inspirational attacks on the concentration of income and wealth that have left the United States and the UK the worlds two most unequal developed nations. Both also rate as eminently pragmatic. They champion the politically possible. But we live today in tumultuous times, and that may be why Toynbee last week found herself celebrating a proposal for taxing the rich that rather boldly stretches most anybodys sense of political practicality. Why not levy, Toynbee asked, a one-time 20 percent tax on the total wealth of Britains richest tenth, a tax graduated to ensure that the richest 1 percent pay at a higher rate than households at the bottom of this top 10 percent? This one-time windfall taking tax, Toynbee suggested, could help save services, save jobs, expunge the national debt, kick-start growth, and set the economy on the road to recovery. The worst ever crisis, she added, needs better solutions than any currently on offer for the grim decade ahead. The United States, of course, faces that same grim decade. And that makes Toynbees proposal a matter of more than idle interest. Could a one-time 20 percent levy on the wealth of the rich really make an appreciable difference?

The source of Polly Toynbees wealth tax proposal, Glasgow Universitys Greg Philo, certainly thinks so. Philo first laid out the proposal last year and even had a national poll commissioned to gauge public reaction. That survey found 74 percent of the UK population approving. Britains richest 10 percent currently hold 4 trillion about $6.3 trillion of the UKs 9 trillion in personal wealth. A 20 percent tax on that 4 trillion would raise 800 billion, enough, says Philo, to pay off the national debt and avoid the need for deep and harmful cuts in public services. Philos plan anticipates one major objection. Few affluent households have 20 percent of their wealth in readily available cash. They have much of their wealth in property of various sorts that would have to be sold, perhaps at a great loss if all the wealthy had to sell at once. Not a problem. The wealth tax, under Philos plan, would not have to be paid all at once. But if a wealthy household wanted to delay payment, that household would have to pay interest on its outstanding wealth tax liability. It would be akin, says Philo, to a student loan for the rich. A 20 percent tax on the wealth of Britains richest 10 percent, points out the Guardians Polly Toynbee, would essentially push back downwards the money hoovered upwards in the last decade. The billions hoovered upwards, Glasgow Universitys Philo adds, have largely been directed into inflated property values. A wealth tax could recirculate this dead money into government expenditures that could stimulate growth. A one-time 20 percent wealth tax, Philo sums up, offers a real alternative that would move debt off the governments books, using money that is largely trapped in the housing market, from people who will not miss it. Could such a wealth tax have a similar impact on the United States? The U.S. numbers on wealth distribution make that question a natural. Our richest actually hold a far greater wealth share than Britains. In the UK, the top 10 percent hold 44 percent of their nations personal wealth. In the United States, notes an analysis from the Economic Policy Institute released earlier this year, just the top 5 percent held 63.5 percent of the nations wealth in 2009. The top 1 percent alone held 35.6 percent. As of April 2011, NYU economist Nouriel Roubini and two colleagues reported last week, total U.S. household net worth amounted to $56.8 trillion. If we assume that the distribution of U.S. wealth has not changed since 2009, our latest year with distributional figures available, then the top 10 percent today hold 75.1 percent of the nations current wealth, or $42.7 trillion.

A 20 percent tax on this wealth would raise over $8.5 trillion, a sum that equals about 85 percent of Americas publicly held national debt. And Americas richest 1 percent? How would they be faring if they had to pay a one-time 20 percent wealth levy? Their average remaining net worth would actually be higher, after adjusting for inflation, than the net worth of Americas richest 1 percent in 1983. Indeed, the top 1 percenters could pay a 25 percent wealth tax and still hold more wealth than their 1983 total. Our next decade need not be grim. Our next decade does need to be more equal. This article was published at NationofChange at: http://www.nationofchange.org/do-we-needstudent-loans-billionaires-1318862349. All rights are reserved.