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When I was asked to join 17 other zillionaires to sign a letter in favor of a modest wealth tax, I did not hesitate for a nanosecond – not just because it was not enough. was the right thing to do for the American people, but because it was the right thing to do for the US economy. In fact, as a venture capitalist and serial entrepreneur who created a personal fortune by founding or financing more than 30 companies, I came to the conclusion that a wealth tax would increase investment, increase productivity, stimulate the economy better jobs.
Now, I know what you think: it's crazy! For decades, wealthy men like me have sold you tax cuts on the merits of a simple economic recovery. The rich are "job creators", we told you. The more we have to invest in creating jobs, the better the economy will be for everyone.
Bullshit.
To be clear: there is simply no empirical evidence to support the claim that rising maximum tax rates are slowing economic growth. When President Bill Clinton raised taxes, the economy exploded. When President George W. Bush cut taxes, the economy finally collapsed. It was only after the expiry of most of Bush's tax cuts under the Obama administration that the recovery from the Great Recession began to take hold – an ongoing recovery that was also uneven it has become the longest economic expansion in our history.
And then, of course, there is Kansas.
In 2012, the governor of Kansas, Sam Brownback, embarked on what he called a "real live experience", opposing pure and simple theory to economic reality. Unfortunately for the Kansans, reality has won. After cutting taxes on individuals and businesses to zero, Kansas has fallen far behind its neighbors and the country in terms of GDP growth and job creation. But just two years after the repeal of these disastrous tax cuts, Kansas has been declared "Economic Recovery State of 2019."
Read more: Meet the 18 ultra-wealthy Americans begging a wealth tax, from a Facebook co-founder to a Disney heiress
And Kansas is far from being an outlier. Studies by the Center on Budget and Policy Priorities, the Congressional Non-Parliamentary Research Service, and the Brookings Institute have all shown that there is a statistically significant correlation between the highest tax rates and the highest tax rates. growth, the slope would be positive. "The argument that income tax cuts increase growth is repeated so often that this is sometimes considered a gospel," noted the Brookings authors. "However, theory, evidence, and simulation studies tell a different and more complicated story."
You see, the problem of the current economy is not that rich people like me do not have enough capital to invest; it is that we do not productively invest the overabundance of capital we already have. And it's a problem greatly magnified by the dramatic rise in income and wealth inequality over the last few decades. Since 1989, the top 1% of Americans has earned $ 21 trillion, while the remaining 50% has earned $ 900 billion. In the richest 0.1%, we now have more wealth than the poorest 90% of the United States combined. And that brings us to the real cause of the chronically slow growth of our country's wages, productivity, investment, and output: our growing crisis of economic inequality. We are concentrating money in the hands of people and companies who already have more money than we know what to do, while starving consumers of the spending power that accounts for 70% of GDP.
Read moreExplanations on the wealth tax: why Elizabeth Warren and billionaires like George Soros claim a specialized tax on the ultra-rich
The consequences of this accumulation of wealth on growth are evident in the steep decline of what economists call the "speed of money" – the rate at which dollars recirculate into the economy. In the years leading up to the Great Recession, every dollar in circulation usually changed hands about 17 times in a given year. For example, you spend a dollar on coffee, coffee pays the barista a salary, which in turn spends it on a hamburger, and so on. But in recent years, every dollar in circulation is spent on average only five times a year – one of the lowest ever recorded. This means that every dollar in circulation generates 70% of economic activity of less than a dollar just ten years ago. What explains this dramatic slowdown in the speed of money? "The answer lies in the dramatic increase in the willingness of the private sector to accumulate money instead of spending it," the St. Louis Fed said in a dismal blog post from 2014.
So, how to recover money in the economy in the face of such unprecedented wealth accumulation? How can we create the good jobs and the good wages that American workers desperately need?
Increase taxes on the rich. Really.
Raising taxes for the rich, and almost everything the federal government will do with revenues, will generate more money in the economy than the rich do with our accumulated money today. Taxing the rich to put money back in the hands of the American people through middle-clbad tax cuts, and corporations will increase their production and payroll to cope with soaring demand consumers. Tax the rich to invest in roads, public transit, bridges, health care, schools and move to a green energy economy. We will create millions of high-paying jobs while building the physical and human infrastructure upon which our collective prosperity rests.
If the highest tax rates were high, low profits, scarce private investment capital, rising unemployment and uncontrollable inflation, a wealth tax would perhaps be not the best idea. But this is not the economy we live in today. What our economy needs now is to get those trillions of dollars of accumulated money back into the hands of working-clbad Americans and the middle clbad.
A wealth tax would not be fair, it would be in favor of growth. And do not let the little guards tell you the opposite.
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