This theory, which I call the “progressive master narrative,” says that once economic inequality passes a critical threshold, the wealthy as a class will use their concentrated resources to consolidate political power and rig the economic and political system to their advantage, leaving ordinary citizens disenfranchised, impoverished, and exploited. To understand how a wealth tax could be self-defeating as a means of protecting democracy, we need to dig into the political theory behind the left’s worries about the corrosive effects of concentrated wealth on democratic institutions. On the contrary, a wealth tax could harm the integrity of our democracy by subsidizing the growth of nefarious global networks of dark money already eating away at the foundations of the republic. However, we shouldn’t expect a wealth tax to work to thwart oligarchy.

There should be no doubt that American democracy is in trouble, and that big money has something to do with it. “It is about regulating inequality and the market economy” and “safeguarding democracy against oligarchy.” This argument was offered in defense of the Ocasio-Cortez proposal, but it applies in spades to Warren’s plan, which would reduce the growth of large fortunes far more effectively than a bump in the top marginal income tax rate. “The root justification is not about collecting revenue,” write Gabriel Zucman and Emmanuel Saez, the Berkeley economists who performed the fiscal analysis of Warren’s proposal. However, few of the many criticisms of Warren’s plan so far address its deeper and primary purpose: to prevent democracy from sliding into plutocracy. Policy wonks tend to evaluate tax proposals on the basis of their likely impact on budgets, economic growth, and the dispersion of income and wealth. Under Warren’s plan, “mega-millionaires” worth less than $1 billion would pay a 2 percent rate every year on everything they own - businesses, boats, stock, houses, land, art collections - while those with 10-figure Forbes -list fortunes would face a 3 percent levy. Warren has proposed to tax the net worth of the approximately 75,000 American households with fortunes greater than $50 million. Īnother progressive plan, from Senator Elizabeth Warren, is even more aggressive - and riskier. Bernie Sanders has put forward a plan to reduce the threshold and raise the rates of the estate tax, while Democratic freshman House member Alexandra Ocasio-Cortez has called for a 70 percent marginal tax rate on income over $10 million per year. The contemporary politics of taxation appears to offer very constrained choices to policymakers, but the aspirations of voters for redistribution through the tax system remain a fundamental feature of political competition and conflict in the rich democracies.The Democratic Party’s lurch leftward has yielded tax plans designed less for raising revenue than for combating the corrosive force progressives believe wealth inequality exerts on democracy. The scope for the usual tools of democratic governance – elections and political party programmes – to alter these paths are more limited than is often understood. Democracy can coexist with quite large differences in overall income inequality, and these differences are often driven by institutional legacies that find their roots in the past.

This connection between democratic politics and taxes is a commonplace of the political economy scholarship, but there is much less clarity about the mechanisms through which this redistribution occurs, and the reasons for variations in the degree to which the objectives of social justice are achieved. Democratic states tend to raise large shares of national income through taxes, and spend the money in ways which redistribute resources from higher to lower income groups.

Democracy 3 tax evasion