The “overgrown influence” of extreme wealth, wrote Thomas Paine in 1792, was “one of the principal sources of corruption at elections.” More than 200 years later, billionaires line up behind the president at his inauguration and the wealthiest Americans exert colossal influence over U.S. politics. Our deeply oligarchic times have vindicated the warning from Paine, whose pamphlet “Common Sense” helped spark the American Revolution. Now we should consider Paine’s solution to oligarchy: a wealth tax with a top marginal rate of 100%.
A tax rate of 100% on billionaires is not a break from American tradition, but a return to it. Paine was far from alone in seeing the extreme consolidation of wealth as an intrinsic danger to republican government. America’s founders saw a rough economic equality among citizens — what Benjamin Franklin called a “happy mediocrity” — as a prerequisite for political freedom. The danger, early Americans believed, was that the rich could dominate the political sphere and turn the functioning of government to their private benefit, making government office a lucrative proposition.
There ought to be a limit to property.”
Thomas Paine in “The Rights of Man”
As a committee of Pennsylvania radicals (including Franklin) wrote in an early draft of the 1776 state constitution, “an enormous Proportion of Property vested in a few Individuals is dangerous to the Rights, and destructive of the Common Happiness, of Mankind; and therefore every free State hath a Right by its Laws to discourage the Possession of such Property.” Although this was ultimately dropped from the final text, the power of the state government to limit wealth was considered as part of the state’s Bill of Rights: a protection for individual freedom.
Paine would go further in his book “The Rights of Man,” published in two parts in the early 1790s, by designing a tax policy to prevent the consolidation of wealth. Paine proposed an annual tax on the returns to wealth with a top marginal rate of 100%. “There ought to be a limit to property,” Paine argued, when that property was far above the amount one could earn through personal effort or could use to care for a family. “The aristocracy has screened itself too much,” he wrote, and this tax would “restore a part of the lost equilibrium.”
The design of Paine’s tax is straightforward. He wanted to tax the annual financial return on wealth — what he referred to as its “yearly value.” He proposed a series of highly progressive tax brackets with rates rising from 1.25% to 100%. As his rates increased, only the money received beyond the previous bracket would be taxed at the higher rate. In 2020 dollars, the first roughly $100,000 in annual returns would be tax-free. At the other end of the spectrum, the 100% rate only applied to annual revenue over about $49 million. At a 5% rate of return, a revenue amount of $49 million comes from an estate of about $1 billion, so Paine’s top rate applies, roughly, to billionaires.
Two proposals from senators — Elizabeth Warren’s “Ultra-Millionaire Tax” and Bernie Sanders’ “Tax on Extreme Wealth” —share common ambitions with Paine’s idea. But Paine’s proposal has one unique advantage: Once enacted, it would automatically capture billionaires’ future windfalls without the need for new legislation. The day after the 2024 election, the 10 richest people in the world saw their own total wealth ratchet up by another $64 billion. Even before the election, our research estimates that Amazon founder Jeff Bezos would have paid $56 billion in tax year 2021 under Paine’s tax proposal. Elon Musk would have paid $125 billion. Instead, today’s 25 wealthiest people pay an effective tax rate of 3.4%.
Paine fundamentally understood that the economy must protect, not undermine, the functioning of republican government. Between 1980 and 2012, the cost of a congressional campaign grew by a factor of seven; in the same period, the cost of a presidential campaign grew 13-fold. As of 2018, the median member of Congress had roughly eight times the wealth of the median American household — and 40 times the wealth of the median Black American household. When the preferences of the rich and the poor differ, it is almost always the views of the rich that become public policy.
Paine devoted himself to the American patriot cause because he believed in government by the people, not by the wealthy and connected few. He recognized that the economy and the polity are inextricably linked and that citizens cannot have an equal voice in politics while wealth is extremely unequal. If we are going to stop the entrenchment of an American oligarchy, a 100% tax on billionaires is just common sense.
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