We Need a Wealth Tax on Billionaires. Here's Why | Aaron Bastani Meets Gabriel Zucman

Your wealth, of course, was a social creation, a collective success, like all wealth creation. You benefited from infrastructure, from education, from healthcare, from the laws that protected your property, and so on and so on. But you also benefited from all the knowledge that's been accumulated over centuries by all of humanity. So there is just—you have duties towards society, towards humanity. So you cannot just say, 'That's it, I'm done. I became rich thanks to all the hard work of everybody, and now I move to another planet.' That's just impossible to defend. Now we need to make that transition towards progressive wealth taxation for the super-rich. So if we don't do it, democracy is at stake. I think this is the battle of the 21st century.

Thanks for having me.

There's been an explosion of billionaire wealth over the last decades and of the wealth of the super-rich more broadly. It's been one of the most important developments in the world economy, with an acceleration after the financial crisis of 2008-2009, and an acceleration of the acceleration over the last couple of years. Like between March 2024 and March 2026, global billionaire wealth has increased 40%, coming on top of everything that happened before that. So now we are in a situation where global billionaires used to own the equivalent of 3% of world GDP in wealth in 1987, when Forbes magazine started tracking billionaires. And today, the billionaires own the equivalent of 17% of world GDP. And we're talking about roughly 3,000 families who, if they spent their wealth, could buy the equivalent of 17% of the value of all the goods and services that are produced in a given year all around the world. So that's the situation, and you've seen that pretty much everywhere: in the European Union, in the US, in the UK. In the UK there is the famous Sunday Times Rich List, which started in 1989. In 1989, the 200 wealthiest families in the UK owned the equivalent of 5% of the UK's GDP in wealth. Today it's 25%. Okay. So again, 200 families who, if they spent their wealth, could buy a quarter of everything that's produced in a given year.

Five. And that's after 10 years of Margaret Thatcher.

That's extraordinary.

It's because fundamentally, wealth for the super-rich is power. Wealth is the power to influence markets by buying competitors, for instance, by cementing monopoly positions. It's the power to influence the prevailing ideology by buying media, newspapers, TV channels, radio stations. It's the power to influence policymaking, it's the power to buy elections, and so on and so on. And so there's a kind of a doom loop where wealth begets more power begets more wealth. And it's been probably one of the main drivers for the rise and the acceleration that we've seen in recent years. Look at what happens in the US, where a significant fraction of the world's billionaires are based there, and we're witnessing the bureaucratic capture of the US federal government by ultra-wealthy individuals. Like just a couple of days ago, Donald Trump signed a deal with the IRS. He was suing the IRS for $10 billion because his tax returns had leaked a few years ago, and so he was asking $10 billion from the agency that he controls as president of the US. And they made a deal where he's not going to get $10 billion, but the IRS is committing to never audit his tax return or the tax return of his family forever. You know, that tells you something about the type of corruption, and more than that, the plutocratic capture that we're witnessing today in the US. And what I want to emphasize is that because sometimes people look at the US and they say, 'Well, you know, it's crazy what happens there, but it can only happen there, and it's not a risk here in the UK or in other countries.' And I think that's wrong. I think that this type of bureaucratic capture can materialize very fast, in just a few years. And I guess if you had asked people, even people who are concerned about these issues, 10 years ago in the US, whether they could think of something like that happening in the next 10 years, I think nobody really expected that level of oligarchic drift. So it can happen very fast. It can happen everywhere. And that's, you know, the fundamental tension that we are facing today in our democratic societies. And there's always a fundamental tension, to be clear, between an extreme concentration of wealth on the one hand and the very possibility of a well-functioning democracy. And, you know, all the thinkers and the people who have written about democracy have highlighted this tension all the way back to Aristotle to, you know, people like Piketty today at the London School of Economics. It's just that for some period of time after World War II, people forgot a little bit about this fundamental tension because extreme wealth after the war had not completely disappeared but was really at a historically low level. And so people thought, 'Okay, these issues belong to the past.' And they've been making this comeback very powerfully over the last few decades, and again with an acceleration over the last few years.

I think it really depends on what you're looking at. If you look at the share of income that's earned by the top 10% highest income earners or the top 1% highest earners, I think it's fair to say that it increased in the 1980s, 1990s, and then it has somewhat stabilized over the last 15 years. What I'm talking about is really about a different problem. You know, the top 1% in the UK, you have roughly 30 million households. So, we're talking about 300,000 households. That's the top 1%. I'm talking about the extremely wealthy, you know, those who are on the Sunday Times Rich List, essentially those who have more than 100 million pounds in wealth, and especially the billionaires. We're talking about just a few hundred families. It's very different, and it's a very different population, and that's where wealth is concentrating today, and that's where the growth of inequality is happening today. And one reason why it's not been emphasized more in the past is, first of all, this trend is relatively recent, or its acceleration at least, but also because there's a lot of opacity about extreme wealth. There's no public statistics on the super wealthy, on their assets, the income they earn, the taxes that they pay. So we have very good data based on household surveys or even tax data for almost all of the population. But the extremely wealthy, they're not in our governance statistics yet. And so, you know, because of that blind spot, we tend to ignore a little bit what's happening at the very top. And even though I think we are at a stage where we really have to care about these extremely wealthy people, not only because of the democratic questions that we discussed, but also from a purely public finance perspective. Even if you don't care about inequality, which I think you should, even if you don't care about the battle between oligarchic forces and democratic forces, which I think you should care, but even if you don't care about these issues and you only care about balancing the budget, the books, you care about public debt and deficits and the bond market, then even from that very narrow perspective, you cannot ignore the problem anymore because now the government revenue at stake, you know, from taxing or not taxing the ultra-wealthy becomes very significant. Just, you know, everybody can understand that if we get back to the numbers that I mentioned previously, when the 200 wealthiest families own the equivalent of 5% of GDP in wealth, it means that if you taxed their wealth at 2%, let's say, this would bring 0.1% of GDP in additional tax revenue. You could say, 'Well, who cares about that?' You know, in the big picture, there's a deficit of like, you know, 4-5% of GDP, it's not going to make a material difference. But now when they own 25% of GDP in wealth, if you tax that at just 2%, you get 0.5% of GDP in additional tax revenue. 0.5% of GDP, that's 15 billion pounds per year. Keir Starmer famously wanted to cut winter fuel allowances for retirees. He was expecting 1.5 billion pounds in additional, you know, revenue from that. And with just 2% on roughly a thousand families who own more than 100 million pounds in wealth, you can get 10 times more money, you know, 15 billion pounds. So that's also the reason why today it's not possible anymore to ignore the upsurge of extreme wealth. Or to put it differently, there's a positive element in this evolution. The positive element is you have a very dynamic tax base which is not taxed today but which could bring now a significant amount of tax revenue. So now I'm not saying that this is going to be enough to solve all the budget issues of this country or France or other countries. I'm not saying that this is going to be enough for all the investments we need to make in education, in healthcare, in the energy transition. Not at all. 0.5% of GDP clearly is not enough. But it's absolutely necessary. I don't see how we're going to be able to make those investments. I don't see how we're going to be able to address our public finance issues as long as those whose wealth is skyrocketing and who pay much less tax than the rest of the population are not asked to contribute a bit more.

Yeah, absolutely. So, this is the type of computation that I try to explain in the book, We Need to Tax Billionaires. There's been a lot of research over the last few years, it's quite recent, trying to compute the total effective tax rate of billionaires and to make it comparable to what the rest of the population pays in taxes. Now there's a long tradition of public economics, of research in that area, which started in the 1940s with some economists in the US, Helen Tarlov, Gerhard Colm, who were the first to ask the question, 'Who pays the taxes?' But until a few years ago, the super-rich were not part of the picture because of the lack of public data. And now that opacity has started to dissipate thanks to an international research effort where different teams of researchers have partnered in different countries with tax administrations to link businesses to their owners and to look at the true income of the super-rich. You know, the true income of the super-rich is their share of the profits of the companies that they own, and to look also at the taxes that they effectively pay, all included. So not only the taxes that they pay personally as individuals, but also the taxes that they pay indirectly through the corporations that they own. So now we can have this comprehensive perspective on taxation. And so let's look at how the picture looks for France. So if you look at the working class, that we can define as the 50% of the population with the lowest income, and if you look at all the taxes that they pay relative to their income, their tax rate is around 40%. They pay a lot of tax. Why? Because you have high VAT, consumption taxes, payroll taxes, some income tax. There's a 10% income tax in France that's withheld on any income, no matter how much you earn.

In France, it's a very weird system where you have two income taxes. There is one which is progressive, like in the UK, where you have some exemption threshold and then the rate increases with your income, and then there's another, in fact bigger, income tax which is a flat rate of 10% on all income from the very first euro of wage that you earn. Now, even if you work part-time at the minimum wage, no, you have to pay 10%. Anyway, the consequence is that the working class pays roughly 40% of their income in taxes. The middle class pays roughly 45-50%. The upper middle class a bit more than 50%, and then it collapses. The tax rate collapses to 25% for billionaires. 25%, which is half as much as the rest of the population. Why is that possible? You know, where is that coming from? That's due to the fact that for the super-rich, the income tax, which in principle is the pillar of tax progressivity, it's supposed to be the way that we make the rich pay their fair share, the income tax vanishes for the super-wealthy. And concretely, what they do is that they put their wealth in holding companies, which are kind of shell companies. It's a tax avoidance technique which is widespread among the very wealthy, and not only in France but everywhere, almost everywhere in the world. There's an interesting exception, which is the US, that I'll get back to. But whether it's in the UK or in France or in other countries, past a certain level of wealth, it's systematic that people put their wealth, which is mostly shares of the companies that they own, in a holding company. And so the holding company receives income, dividend income. And because the income on paper, these are all accounting games and there's no substance in any of that. But on paper, the income is paid not to an individual but to a company, that income essentially goes tax-free, free of personal income tax. And there's typically no tax that's paid at the level of the holding company. And so the consequence is that the effective income tax rate, personal income tax rate for billionaires in France is just 2%. They pay 2% of their income only in taxes, and many of them close to 0%. And we now have studies for about 10 countries: France, Norway, Sweden, Netherlands, Italy, US, Brazil, and so on, where everywhere we see the same pattern. We see that the working class pays a lot of tax, consumption taxes, the middle class pays a lot, but the ultra-wealthy everywhere have much lower effective tax rates than the rest of the population. We suspected, I think many people suspected that this was the case. But until three, four years ago, there was just no hard statistical evidence on this. And now the reality is emerging, and it's frankly, it's deeply disturbing because this regressivity is a violation of the basic, of the fundamental principle of equality before the law. Equality before the law. The most conservative interpretation that you can make of that principle is that wealthier individuals shouldn't be allowed to pay less tax relative to their income than the rest of the population. And this is precisely the situation we're in today, you know, where essentially the super-rich can live in their own parallel society, almost free of tax. And of course, there's a proper debate to have, there's a legitimate, sorry, there's a legitimate debate to have about the proper degree of tax progressivity, meaning the extent to which wealthier individuals should pay more tax relative to their income than the rest of the population. And it's totally normal for people to disagree about that. You know, more conservative people, they will favor less progressivity. More left-wing people, they will favor more progressivity. It's, you know, it will always be a central aspect of political conflict, and it's easy to get it wrong, to have too much progressivity or too little. You know, these are complicated questions, and fine, but I think no one should agree, and fundamentally no one agrees with the possibility that the wealthiest people in society should be allowed to contribute less than school teachers or, you know, workers, retirees, what have you, the rest of the population. That's just fundamentally a violation of this core principle of equality before the law, which is at the heart, at the core of the rule of law, of what it means to live in a democracy. And so this is this anomaly that's been put to light by this recent wave of research that I describe in the book. The book is mostly about, okay, what have we learned over the last three, four years from this international research agenda, you know, what are the facts, and of course, if we take, then the second part is, okay, if we take those facts seriously, what is, in my view, the most logical solution to that problem.

Yes, I've seen that.

Yeah, I've seen his comments, and it's really pragmatic. But it's not just him, you know, it's a perspective that you often hear in the public debate that says, okay, you know, only the rich pay taxes, and you know, the top 10% accounts for 70% of the taxes, and so on. And that's based on a fundamental misunderstanding and deception, which is that it's only looking at one tax, which is the income tax. The income tax is just one among many other taxes. And it's supposed to be the one progressive tax, the one tax that makes the rich pay. And so it's supposed to offset in particular the regressivity of consumption taxes, which are very heavy and which absorb a bigger fraction of income for the poor than for the rich, because the poor consume a greater fraction of their income. And so of course if you just focus on the one tax that's supposed to be progressive, it's true that, you know, a high share of the income tax, a high fraction of the income tax is paid by the rich, and there is some progressivity up to some point. But there are two problems with this.

Yeah. Yeah. Exactly. So the two problems with this argument is that what do we mean by the rich?

You know, look, in the case of Bezos, it's particularly striking. You know, there were revelations a few years ago by the US media, ProPublica, on the taxes paid by US billionaires, including Bezos. And you saw in some years some of these billionaires reporting very little income and paying very little income tax as a result. There's even one year when Bezos himself says, 'Look, I'm so poor that I'm going to claim family benefits.' And he receives family benefits. He receives a tax credit for his children, pays no income tax, but he receives a check from the government. And so it's all in the public domain, and there's nothing illegal in that. It's the way the system works. If you have found ways to have no taxable income, to have no income from the perspective of the tax system, then you don't have income tax to pay. So how did he do this? As CEO of Amazon, he didn't pay himself a wage. As the controlling shareholder of Amazon, he instructed the company not to pay out dividends. He didn't sell shares in the company. So, he didn't realize any capital gains. And so, his taxable income was really very low, even though his true economic income, which is his share of Amazon's profit or his wealth, are really high. And so his ability to pay taxes is really high. And basically what the studies have shown is that this problem is not just a few isolated cases like Bezos or, you know, the Google founders, you know, it's like Sergey Brin, Larry Page, they're in the same situation. And you can see that just from public data, you know, they own shares in Alphabet, but the company until recently didn't pay out any dividend, they didn't sell any shares, they didn't pay themselves a wage, and so, you know, just no taxable income and so no income tax paid. So you have these cases, but what the studies show is that it's a systematic problem. It's a systematic phenomenon that for the truly very wealthy, they very largely avoid the income tax. So that was the first problem in the argument made by Bezos, which is that, you know, in fact, no, the billionaires, the upper-outer class might pay a lot of income tax. Sure. But the billionaires, no, they are outside of the system. They've not yet opted in. You know, that's really what we've discovered collectively as a research community, which is that the income tax, which is a big democratic achievement of the beginning of the 20th century in many countries. You know, the progressive income tax was created in the UK in 1909, in the US in 1913, in France in 1914. It is still an incomplete revolution. You know, by and large it works quite well for the middle class, for your upper middle class. There is some progressivity, but for the super-rich, no, they're still not yet into the system. And so now the challenge and the reason why I wrote the book is to kind of complete this revolution, you know, to bring the super-rich into the system. So that was the first problem with the argument made by Bezos. And of course the second problem is that he was looking just at one tax, the income tax. And when you look at all taxes paid, then the working class, the middle class pays a lot of tax. You know, that's really important to remind people that, you know, there's not just the income tax, there's consumption taxes, there's VAT here in the UK and so on. And that's a heavy burden for most of the population. And so, you know, everybody contributes to funding our society, everybody contributes to funding education, healthcare, you know, and what makes us prosperous collectively, except the billionaires, basically, who contribute not exactly zero. They contribute, they like to remind us, and they're correct about that, that even though they might not pay a lot of tax personally, they pay some taxes indirectly through the businesses that they own, like the company pays some corporate tax. Okay. Now if you take that into account, their total tax rate is 25%. When you look at the total tax rate of the average person, it's 50% in France, it's going to be a bit less in the UK, but there's going to be a gap of that order of magnitude, by a factor of two.

Well, certainly I think it's true that in most countries it's that group of the population that has the highest effective tax rate, and much higher rate than billionaires.

Which doesn't mean that they're paying too much tax. You know, that's not the argument that I would be making. I think my argument is that the billionaires are paying way too little and that they should pay at least as much, and in fact in reality more, much more than the upper middle class or the rich but not super-rich. So my, you know, I would not argue, if you want, for saying, okay, let's tax billionaires in order to cut taxes for people who make £100,000. No, I don't think that that's the most productive and useful use of that money. I think...

I think we are going to have to continue the trend that started in the 20th century of mass public investment in education, in healthcare, in public infrastructure, which during the 20th century was really the key engine of economic growth and the rise in productivity. You know, it was the fact that we transitioned from economies where the government, the tax-to-GDP ratio was 5-10% at the beginning of the 20th century, and so the government was really small, to a much bigger government with a tax-to-GDP ratio of around 40-50% of GDP in Western European countries, in Nordic countries, and massive public investment in the social state, in education, in healthcare, in infrastructure. And this is what has been central in the multiplication by a factor of 10 of productivity during the 20th century. And some people think that this happened once and we should stop there, and, you know, that's the end of history. And, you know, the government either can only stabilize or should shrink. And I think there's a good case to be made that, you know, probably this trend ought to continue at least a little bit, because when you think about it, what are going to be the main needs in the 21st century? We have population aging, which means we'll need more healthcare. We are going to need to invest massively in the energy transition. We need to invest more in higher education and in research. And so these are all areas of production where the private sector might have some role to play, but also where the public sector often is much more efficient than the private sector. Now think about healthcare in the US, terribly inefficient, in addition to being very unfair, you know, with very unequal access to care and very unequal health outcomes, but also very inefficient as opposed to healthcare in Europe, much more equal, but also more efficient. And so given that we are going to need more of those services, given that these immaterial sectors are going to grow in the 21st century, you know, there's a good case to be made that we'll need more government revenue. Okay? And so what we need to think about is how are we going to get there? And we're not going to get there only by taxing the super-rich. I want to be very clear about that. But it's also going to be impossible to get there if we don't start taxing the super-rich.