Taxing the wealth of billionaires is not radical. What's radical is the status quo, the current situation where we allow the wealthiest and most powerful people in society to live nearly tax-free in their own parallel society. How can we accept that those people, whose wealth by the way is exploding, are allowed to pay less tax than school teachers and firefighters? This is the battle, frankly, of the 21st century: democracy versus oligarchy.
Welcome back to the Better Future podcast. This is an exciting one because we're about to hear from the world's leading expert in taxing the ultra-wealthy, and he's going to share not just why we need to do it, but exactly how to do it. My guest today is Dr. Gabriel Zucman. He's a professor at the Paris School of Economics and at UC Berkeley, and he's the author of several books, including most recently, We Need to Tax Billionaires. In this conversation, we discuss how the ultra-wealthy hide their money from taxation, and how our current system of taxes based on income allows them to do it. Then we discuss the wealth tax, how it solves the problem, and how all the arguments against wealth taxes are just more billionaire propaganda. Finally, we dive into a very important upcoming vote in my home state of California, where we're deciding whether we're going to tax the wealth of billionaires. This would be the first ever tax on the net wealth of ultra-rich people in the history of the United States, so it is a very big deal. Before we dive in, a quick reminder that Better Future is an independent podcast and we depend on your support. So, if you can, please sign up for a paid subscription over on Substack. That is what allows us to keep the full conversations free and make more of them. All right, let's dive into this conversation with Dr. Gabriel Zucman. Gabriel, nice to see you. Thanks for being here.
Of course, I'm excited to talk to you. You're the world's leading expert on wealth taxes, and you have a new book, We Need to Tax Billionaires, which we're going to talk about today. We're talking about it in California where there's a wealth tax on the ballot for a billionaire tax. So, it's all very exciting and timely. So, thanks for being here. We can dive right in. I think maybe something about your personal story that really resonates with me, and I want to start with just to ground the conversation, is you said that you were kind of radicalized by living in California. That just being around so much wealth and so much poverty changed the way that you saw the world and made you want to work on inequality. So could you tell us a little bit about that?
The Bay Area is one of the most unequal regions in the world. You have the top billionaires, the wealthiest people in the world, living nearby thousands, tens of thousands of homeless people. And after all these years spent looking at the curve shooting up, the wealth of billionaires exploding, I thought, what do we need to do? What can we do collectively to address this defining challenge of our time, the explosion of inequality, the explosion of extreme wealth?
Yeah, that's so deeply relatable for me because the same thing happened to me living in Los Angeles, the other big city in California where I grew up seeing huge mansions with, you know, walled gardens and then a few blocks away seeing effectively shanty towns set up by people who don't have homes who are just trying to survive on the street. And as a child, I just remember thinking, what's going on here? Like why is it this way? And I do think that was like a formative experience for me. So just to hear that you came out to California. Was it for university that you came here?
Yeah, I grew up in Paris where I was born and then I moved to Berkeley in 2013 and I've been on the faculty pretty much since then to teach, to do research. But initially my work was not about inequalities. It was not about billionaires. It was about more like international economic relations and competition between countries, tax competition in particular, and the rise of tax havens. This is the type of stuff that I studied for my PhD. But then after arriving in Berkeley and seeing this inequality that's so, you know, everywhere in the Bay Area, that's really what led me to study the issue.
Got it. Well, I think we're going to spend most of today talking about wealth taxation, billionaire taxation, and what's going on in California now and globally. But I think it would be a disservice to your work to not touch on the economic relations bit that you've spent a lot of your career focusing on. One of your previous books, The Hidden Wealth of Nations, which is a very clever spin on The Wealth of Nations by Adam Smith, who many call the founder of capitalism, or at least the founder of modern economics. Your book exposed the way a significant share of the world's wealth is hidden in tax havens that causes it to disappear from the national income statistics and therefore allows it to avoid taxation. So how do tax havens hide wealth and, more importantly, how does that affect the average person listening to this podcast?
It's an issue that until recently we didn't have a good way to quantify the amount of wealth at stake, how much money is hidden in tax havens. You'll hear about those stories in newspapers, and we've heard about that for a very long time: secret Swiss bank accounts and banks in the Cayman Islands and so on. And what I've tried to do in some of my early work is to quantify how much money we're talking about. And of course, whenever you study tax evasion, it's not like you can download a data set that's going to tell you all the tax evasion done by every person in the world.
Yeah, it's hidden. That's the point.
It would be easy to do that, but that's not how it works. And so you have to be a bit creative. And so you have to use, for instance, as I've done in my work, anomalies in international investment statistics that are caused by the use of tax havens. So for instance, very concretely, when you look at data on global investment, you realize that globally there's more liabilities than assets. It's as if planet Earth was partly owned by another planet, which is one hypothesis. But another hypothesis is that those assets that are not being recorded, they're not recorded because they're hidden in places like Switzerland or like the Cayman Islands. And so it's by exploiting these statistical anomalies that I was able to estimate that about 8% of the world's household financial wealth is held in tax havens globally, in countries with a tradition of bank secrecy.
And to your question of what are the implications for the rest of us? Well, most of that wealth, at least for a long time, used to evade taxes. And so we are talking about predominantly very wealthy people who have a ton of money, trillions of dollars in offshore tax havens. They don't pay tax on that wealth. They don't pay tax on the income that this wealth generates. And so it means the rest of us have to pay more tax, or it means that the governments have to slash public spending on education or infrastructure and so on. So we all bear the cost of tax evasion by the very rich.
And this I think is a really important point to zoom in on because you're not saying, you know, you've become known as the wealth tax guy. There's a tax called the Zucman tax in France that we'll talk about that has your name on it literally. Someone might look at this and think, 'Oh, this guy just wants to punish rich people, right?' But you're not asking for any sort of different treatment for ultra-rich people. What you're saying is that they should be taxed just the same way that everyone else is.
Yes. And I think it's a fundamental principle in our societies, this principle of equality before the law. No one is above the law in principle, right? It's really at the pillar of what it means to live in a democracy, in a country that's subject to the rule of law. But when you look at the reality, you realize that there's a lot of tax evasion at the top of the wealth distribution. But also, and in fact it's even more important than that, there are many legal ways for the super-rich to avoid paying their fair share, to such an extent that they end up paying in tax, the billionaires in particular, significantly less tax relative to their income than the average person. And that's a problem that has been established, that has come into view only quite recently over the last five, six years, for a very simple reason: that there's no government statistics on the taxes paid by the ultra-wealthy. And so it's only through research, new research, that we've been able to establish this fact: the super-rich pay much less tax than the average person.
And you've called this push to tax billionaires part of an unfinished revolution. What do you mean by that?
The income tax was a big creation of the beginning of the 20th century, 1913 in the US, the federal income tax. It was a big revolution because it was moving from very unfair tax systems based mostly on consumption taxes to modern taxation where there is an income tax whose rate increases with income. So really a very important development, a revolution that has been at the pillar of modern taxation, that has allowed government to raise much more money to fund education, infrastructure, and so on. Overall, a big success, but this revolution is unfinished because the super-rich still don't pay income tax, or still don't pay a significant amount of income tax. That's what we've discovered very recently. And the reason for that is because when you're extremely wealthy, think of people who have more than a billion dollars in wealth, you can very easily structure your wealth such that this wealth will not generate any income or any significant amount of income. Let me give an illustration. A few years ago, there were revelations by the media ProPublica on the taxes paid by US billionaires. And so you saw people like Elon Musk or Jeff Bezos in some years paying very little income tax. There's even one year when Bezos says, 'Look, I'm so poor that I'm going to claim the child tax credit.' And he receives the child tax credit.
And there's no tax evasion involved. That's not illegal. That's the way the system works. As CEO of Amazon, he didn't pay himself a wage. He instructed Amazon not to distribute dividends. He never sold shares in Amazon, so he didn't realize capital gains, and so his taxable income, what shows up on his tax return, was really low. So from the perspective of the tax law, he was indeed a poor person, even though of course he's one of the world's wealthiest individuals. And that's a good illustration of this fundamental problem that the income tax fails to effectively tax the super-rich. It is an unfinished revolution.
So to finish the revolution would be to find a way to tax these people in a fair manner so that they're not above the law.
Exactly. We have to finish this revolution. And so there are not 36 ways to do it. At the end of the day, income is just not the right indicator of the ability to pay taxes. For the billionaires, wealth is much better because income is easy to manipulate if you're very rich. Wealth is much harder to manipulate. Bezos can claim he has no income. That's fine. That's legal. He can do that. But he cannot claim he has no wealth. It's not going to work. And so that's why if you want to tax those super-rich people effectively, you need some kind of tax that's based on their wealth.
So let's quickly set the stage for where things are at today. I think you've described how there's legal unfairness baked in. How much do these people pay in taxes right now in terms of their effective tax rate? What does it look like for a Jeff Bezos or an Elon Musk if you look at their effective tax rate?
So, first of all, let's look at the average American. Very simple computation to make. You take the total amount of tax paid by people in the US, all taxes, individual income tax, payroll taxes, property taxes, everything, and you divide that by the total income of the US population, and the average tax rate is 30%. That's the average tax rate in the US. Now, if you do the same computation for billionaires, you take all the taxes they pay, including the taxes that the businesses that they own pay. So all the taxes that billionaires pay directly and indirectly through the businesses that they own, divide that by their income, and you get 24%. Okay? So billionaires pay significantly less overall than the average US person. That's a problem because the most conservative interpretation that you can make of the principle of equality before the law is that wealthier people shouldn't be allowed to pay less relative to their income than the rest of the population.
Yeah, it's one thing to say they should even pay more, but they definitely shouldn't pay less. But if you take the most conservative interpretation possible, it's that they shouldn't be allowed to pay less.
But that's precisely the situation we're in today. It means that our laws violate the basic principle of equality before the tax law. So there is here a fundamental democratic, economic issue that needs to be fixed, and it's a problem very much in the US. It's a problem in California. It's a problem all over the world. Even in Europe, even in Nordic countries like Norway and Sweden that have this reputation of being very equal, of taxing the rich a lot, even there the super-rich pay much less tax than the rest of the population. So it's a global problem, and frankly, it will come to be seen in a few years. It's already seen by many people as an absurdity, an anomaly. But it will come to be seen as really something like, why did we tolerate that? How can we accept that those people, whose wealth by the way is exploding, are allowed to pay less tax than school teachers and firefighters? That's unacceptable.
And it's interesting that they pay less on income. But you're saying that income isn't even the right metric. So, if we look at wealth, what does that look like over the last few years? Because I know that just based on the crazy valuations in the stock market and the growth in these tech companies that many of these billionaires own, their wealth has exploded. And I wonder like how much of that wealth is being taxed.
Well, they pay very little in wealth relative to their wealth as well. And if you look at the taxes they pay relative to their wealth, that has really collapsed because their wealth has increased so much that it means that relative to their wealth they pay very little today. Like one example in California. California has supposedly the most progressive tax system among US states and the reputation for imposing a high income tax burden on high income residents. But if you look at the billionaires in California, we're talking about roughly 250 people, and the amount of California income tax that they pay relative to their wealth is just 0.2% of their wealth. Pay just 0.2% of their wealth in income tax each year. It's really very, very little. And you see in some years again people like founders of Google, Page, Brin, or Mark Zuckerberg paying zero, almost zero income tax, whether it's the state income tax or the federal income tax, always for the same reason: they just find ways to have no income to report. And so that's the situation today, and that's the situation we frankly need to fix.
This is important because I think a lot of people like to say a wealth tax is like a radical idea, but I think the way that you've laid things out, which is just the facts, the numbers, it seems like the current situation is actually much more radical than what you've proposed.
I think taxing the wealth of billionaires is not radical. What's radical is the status quo, the current situation where we allow the wealthiest and most powerful people in society to live nearly tax-free in their own parallel society. That's radical because that's leading to an explosion of inequality, because of course if you don't have tax to pay, like mechanically your wealth is going to grow faster than the wealth of everybody else. You and I, we earn some income before we can save any money and grow our wealth, we first have to pay our taxes, right? And with whatever remains we can save. For the billionaires, it's not like that. They earn money, a lot of money. They don't have in many cases a significant amount of tax to pay, and so they can save pretty much all their income. And so you have a kind of snowball effect on wealth accumulation. People who are already the wealthiest people in society can grow their wealth at a faster rate than the rest of us. And that's how the wealth of billionaires has been growing by 10% a year on average over the last four decades at the global level, and in the US it's been even more than that.
This also feels really important because I think what a lot of people who look at the situation, they say it's fine or we shouldn't tax them. They think, you know, it's their money. They did a great job growing these businesses. They're smart entrepreneurs. It's fine that they get really rich. I don't know why these progressives want to tax them. They're just jealous or something. This is how the argument goes. But, you know, I think something that Gary Stevenson, whose name I see on the front of your book, I think something that he has articulated very well, and part of the reason he's gotten so famous so quickly, is that he's made it very clear: no, when the rich get richer, you get poorer, right? And I think this contribution to inequality and the shift in the overall pie, like if you can imagine all of our wealth, all of society's wealth as a pie, which is what economists love to do, the really rich people's slice of the pie is growing faster than the pie is growing, which means that over time inequality is just getting worse and worse, which means they own more assets. And if they own more assets and the amount of assets isn't changing, we working people own less. Is that how you see it?
Partly, but not totally, because there are lots of situations when people can earn income and grow their wealth and it's positive sum for society as a whole, right? You know, they make money and they're not taking money from anyone else, and that's totally fine. But it's also not always like that, right? And so it's very important to understand why, for the particular case of extreme wealth, it's often not like that. It's not positive sum. And the reason fundamentally has to do with the nature of extreme wealth. Wealth for most people is a good thing. It's pension saving for your old days, or it's owning your home. And so that's good. We'd like to encourage wealth accumulation for the middle class. We'd like the working class to have access to wealth, which largely doesn't have access to wealth today because the bottom 50% of the distribution owns almost no wealth at all. But for the super-rich, they are not accumulating billions for their retirement, right? That's not what wealth is. It's not safety. Wealth for them is power. And so extreme wealth always means extreme power. It's the power to influence the prevailing ideology by buying media companies, newspapers, TV channels, radio stations. It's the power to influence markets by buying competitors. It's the power to influence policymaking, to buy elections. And so look, there's always a fundamental tension in democratic societies between extreme wealth on the one hand and the very possibility of democracy on the other hand. And so that's the fundamental reason why we should all care. Now consider the following thought experiment. Imagine that someone, out of pure luck or for whatever reason, even if it's not luck, even if it's through hard work or what have you, inventions, imagine someone ends up owning, you know, 90 trillion dollars of wealth, 99% of the world's wealth. Would you like to live in a society like that, where there is one person who owns 99% of the world's wealth? You would not, because there's no genuine freedom in a world like that.
Yes. And so that's the fundamental reason why we should all care about extreme wealth and extreme wealth concentration. Now, of course, it's difficult to know when the level past which the concentration of wealth ends up undermining our democratic ideals. It's a complicated question, but we cannot avoid asking that question.
It seems like we've passed that point at some threshold in the last, I don't know if it's a few years, a few decades, but we're at a point now where billionaires are quite literally buying elections. I mean, they're doing their best. You can say that there's other people who are also having influence. You know, there's popular movements. There's ground game that elections can still build to fight the billionaire-owned press. But like we're getting to a point where, especially in California, like the people who own much of the wealth also own the media. They own the tech companies on which we have these conversations. They own the platform that you may be listening to this podcast on right now. And so it's starting to feel like it's not really a public domain. It's just like a few billionaires in a trench coat that are owning everything and putting their finger on the scale when elections come around.
I mean, they own a lot of the media. They own the platforms that people now depend on to get their news. They own the algorithms. They own the AI companies that are going to play such an important role in the future. And the level of wealth at the top in a country like the US today is unprecedented. Many people have in mind the Gilded Age of the beginning of the 20th century, the robber barons, Carnegie, Rockefeller, and so on. If you look at their wealth, the wealth of the top 0.00001% wealthiest people of the time, their wealth was equivalent to about 4% of US GDP. It means that if they had spent their wealth, those oligarchs of the late 19th century, early 20th century, if they had spent their wealth, they could have bought 4% of everything produced in the US in a given year at the time. Now if you do the same computation for the same fraction of the population today, their wealth is equivalent to about 13% of US GDP.
Okay. So you have about 20 families. That's the 0.001%. If they spent all their wealth, they could buy 13% of all the goods and services produced in a given year in the US. And that means they can buy, you know, not only media companies, newspapers, but influence people working for them in think tanks, in foundations, they can buy politicians, they can fund campaigns. And so I think this statistic at the end of the day is the most striking illustration of the unprecedented level of wealth at the top, and so the unprecedented influence of extreme wealth on the overall American society.
So they're three times more wealthy than the robber barons.
Wow. Okay. Let's, before we get into how to do this, because you have a lot of detail in the book which I appreciate around like literally what do we do? This is how to do it. You've researched all the different ways to do it, and you lay out this is exactly the policy that these countries should adopt. I want to quickly take a few minutes to debunk some of the common arguments against wealth taxes. I think this will be fun. Among people who don't think we should tax the ultra-rich, there's a common stat they like to share that the top 10% pay the majority of taxes, and there's a chart that they like to show with it. Why is this misleading?
Well, it's misleading for two reasons. One is that no one is denying that the top 10% overall pays a lot of tax. Top 10% is going to be relatively high-wage workers and, you know, small business owners, medium-sized business owners. You know, by and large they pay a decent amount of tax. We're not talking about the top 10%. Top 10% in the US is 20 million families. The billionaires, it's a dramatically, dramatically smaller fraction of the population. You have about 1,000 to 2,000 billionaires in the US, and the problem is really with them, not 20 million people, but more like 1,000, 2,000 people. Number one. Number two, this statistic, which is the fraction of income tax paid or the fraction of tax paid by one particular group of the population, conflates two different things. One is what's their effective tax rate, meaning how much tax do they pay relative to their income, and two is what's their share of total income, how much inequality there is. So for instance, if one person earned all the income of the country, then that person would also account for 100% of tax payments in that country. And so should we be like, oh, you know, that's really terrible, that person is paying all the tax? No, because the problem is that that person accounts for all the income, earns, captures all the income. So that's why those statistics are misleading.
Yeah. And this is, I really want to double click on this point because you're not talking about taxing lawyers more or taxing doctors more or taxing business owners more. I think your accounting would suggest, and maybe you have opinions on how their taxes should change too, but what you're really advocating for with the wealth tax and the billionaire tax is just targeting this very, very small sliver of people at the top. Which means if you're listening to this, that's not you. Professor Zucman is not saying your taxes should change. He's saying, let's stop this very, very, very small portion of the population who own almost everything and a growing percent of everything should actually start paying taxes because they're avoiding them. Now,
that should be the absolute priority. And frankly, no one should be asked to pay more tax before those guys pay significantly more because they are the social group who pays the least today. So, that's just not acceptable. However, don't get me wrong. I think that lawyers, doctors, high-income professionals, you know, they could and they should also pay more tax. I think more broadly speaking, we are going to need in the US, in the rest of the world, we are going to need more tax revenue overall to deal with the challenges of the 21st century, with climate change, with the need for more investment in higher education, for health care, we have aging populations. And more broadly to continue the trend that started in the 20th century where the government has started to invest massively in those public goods, which has been the key in fact of economic growth and development. And so we're going to need more tax revenue, and the billionaires are not going to be enough. I want to be very clear about that. We can't fix all the problems of the US, all the problems of the world just by taxing billionaires. However, we are not going to be able to fix any of those problems as long as the super-rich don't pay their fair share, because first it's going to be very hard for other groups of the population to accept to pay more. But also because now, and even though we are talking about a small number of individuals, their wealth has increased so much over the last four decades that now the government revenue at stake from taxing them or allowing them not to pay tax today is actually quite large. And many people have remained stuck in the 1980s, before the explosion of billionaire wealth. And so many people are like, you know, the billionaires, it's just a thousand people. Who cares? You know, whatever amount of tax they pay, it's just not a public finance problem. That might have been true in 1980. In 2026, it's just totally wrong. Because look, one striking statistic that illustrates this: look at California. The wealth of California's 250 billionaires is as large as the total income of all Californian people. Think about this. Look at all the income that the taxpayers of California report on their individual income tax return each year. The grand total, you know, adjusted gross income, AGI, if you file your taxes, you know what it is. Take total income reported by all the taxpayers of California. That's about $2 trillion today. Now you look at the wealth of the 250 billionaires of California, and it's about the same, $2 trillion. So it means that with, for instance, a 5% tax on the wealth of California's billionaires, like Prop 40, you raise as much revenue for the state of California as with an income tax of 5% on the income of everybody in California. I think it shows very concretely, very clearly why now the question of billionaire taxation is not just a fairness question, it's not just a question of fighting inequality, but now is a question of public finance, of government revenue. There's real money at stake.
Hey there, Michael here. Thanks to Shared Future for being a sponsor of this episode. As you've heard from Professor Zucman, billionaires are not paying their fair share of taxes, which is why they're doing everything they can to distract you from that fact. A favorite distraction tactic is to blame the easiest historical scapegoat: immigrants. They tell you immigrants are freeloading, that they're taking your jobs, and that they're not paying taxes. But actually, a recent study in the US concluded that undocumented immigrants paid more than a hundred billion in taxes in just one year. And those taxes helped fund social programs that they can't even sign up for, which means they have a positive overall contribution to public finances. So, the problem isn't immigrants. The problem is billionaires avoiding paying their fair share and then buying the media to convince you that immigrants are the problem. Don't be fooled. Follow the money. The paper trail makes it clear what we need to do: tax them. So, for details on how to tax them and make sure it actually works, let's get back to the episode with Professor Gabriel Zucman. Back to debunking some of these arguments against the wealth tax. A common argument, perhaps the most common argument against wealth taxes, is that if we tax wealth, wealthy people will leave. Is that true?
Some of them might leave. But first of all, relatively few of them leave according to the different studies that exist. There's a huge body of work that looks at tax changes. For instance, in one given state, like Massachusetts increased its income tax a few years ago, did some people leave? Yes. But these are small numbers. But more fundamentally, this out-migration is not a law of nature like gravity. Many people view it like that. You tax the rich, it's like gravity. They're going to move to another state or to another country. And that's deeply wrong because it 100% depends on the rules that governments implement in that context. So what I mean is that for instance in the US, people are taxed no matter where they live if they have US citizenship. So if the federal government increased taxes on the rich or introduced a wealth tax and some people chose to move to the Cayman Islands or to Monaco or what have you, it makes no difference. They still have to file and pay federal taxes as if they were living in the US. Many countries do differently. For instance, almost all countries say, 'Look, we're only going to tax you if you live in our country. And now if you move to another country, we stop taxing you.' Of course, if you organize the tax system like that, you give people incentives to move.
