Tax the Rich!
And save our democracy.
This morning, Robert Reich in his Substack article said, “ It’s important that we demonstrate against Trump’s assertion of royal powers. It’s at least as important to follow the money — and learn the identities of America’s billionaire royalty who crowned Trump in the first place. They’re now spending another regal fortune to keep Congress under his control.”
As of March 1, according to a new report from Americans for Tax Fairness, the 50 biggest-spending billionaires in American politics had already contributed over $433 million to the upcoming midterm political campaigns. 80 percent of the billionaire’s contributions support Republican candidates or conservative issue groups. (Roeloffs, 2026).
From $16.6 million in 2008 to $3 billion in 2024, billionaire campaign spending has increased by more than 12,000% when adjusted for inflation. (Sterling, 2026) In a recent Washington Post/Ipsos poll, 58% of respondents said billionaires’ campaign spending is bad for the country. (Clement et al., 2025).
In his book Capital in the Twenty-First Century, Thomas Piketty explains that wealth grows faster than wages through the historical relationship (r > g). The r stands for the rate of return on capital, while g stands for the rate of economic growth.
Piketty argues that this inequality is a fundamental “contradiction” of capitalism: (Mongiovi, 2015, pp. 558-565).
In Thomas Piketty’s work (most notably in Capital in the Twenty-First Century), r denotes the rate of return on capital. It represents the average annual return earned on wealth — including profits, dividends, interest, rents, and other income derived from owning capital assets.
This is central to his famous inequality r > g, where g denotes the rate of economic growth. Piketty argues that the return on capital exceeds the overall growth rate of the economy; therefore, wealth tends to concentrate in fewer hands over time, driving rising inequality.
Piketty’s “fundamental contradiction of capitalism” refers to the inequality r > g — the idea that the rate of return on capital persistently exceeds the overall rate of economic growth.
In plain terms, the formula r > g states that the net rate of return to capital (r) exceeds the growth rate of output (g). The latter, Piketty suggests, is what determines wage growth rates.
The fundamental structure of capitalism is that if a capitalist invested one unit of capital and reinvested the return completely, while a worker received a wage that grew only at the rate g, the ratio of the capitalist’s wealth to the worker’s wage would grow at the rate r > g.
Piketty calls this a “contradiction” because returns to capital exceed returns to labor, and this is hard-wired into the system, so too is rising inequality, absent wars, depressions, or aggressive progressive taxes. In other words, capitalism naturally and automatically tends to concentrate wealth in fewer and fewer hands — not as an accident or policy failure, but as a structural feature of how the system works. (Martinez & Stockhammer, 2014).
In the first half of the twentieth century, this rate of return was eroded by capital losses during the world wars, as well as by inflation, taxation, and regulation of capital, causing the effective value of r received by capital owners to plunge. Piketty argues that as those exceptional disruptions faded, r > g reasserted itself, driving the inequality we see today. (Piketty, 2014).
As a remedy, Piketty proposes a global system of progressive wealth taxes to reduce inequality and prevent the vast majority of wealth from falling into the hands of a tiny minority. Because it is a utopian idea, he suggests imposing progressive wealth taxes incrementally, by region or country.
The (Rate of Return on Capital) represents the average annual yield on assets such as stocks, real estate, and bonds, derived from profits, dividends, interest, and rents. Piketty estimates that this historically averages around 4–5%.
The (Economic Growth Rate) represents the growth of the overall economy (GDP) and determines the growth of the total pool of labor income and wages. He notes this typically averages about 1.5% in developed nations. (Piketty, 2014).
Compounding Returns: Because the rate of return on existing wealth (r) is consistently higher than the growth of the economy (g), the pool of wealth owned by asset holders compounds more quickly than the pool of income earned by workers.
Reinvestment: Wealthy individuals typically do not need to consume all their capital income. They reinvest a large portion, allowing their total assets to grow at the rate (r), while workers’ incomes grow only at the rate (g).
Declining Growth (g): Piketty observes that as population and productivity growth slow down, (g) decreases. If (r) remains stable, the gap between the two widens, making inherited wealth even more dominant over earned income. (Inherited vs self-made wealth: Theory & evidence from a rentier society (Paris 1872–1927), 2014, pp. 21-40).
Patrimonial Capitalism: Over time, this dynamic leads to “patrimonial capitalism,” where the economy is increasingly dominated by inherited wealth rather than meritocratic labor. (Milanovic, 2014)
Because Wealth Outpaces Wages, a steeply progressive tax must be implemented to prevent a high rate of inequality.
Wealth Concentration: The top 10% of the wealth distribution historically owns more than 50% (and often up to 90%) of total wealth, meaning most of the gains from (r) flow to a small group. (Piketty et al., 2025).
Historical Aberration: Piketty suggests that the mid-20th century (1914–1970) was an anomaly in which (g) was high and (r) was suppressed by wars and progressive taxes. He predicts a return to 19th-century levels of inequality where wealth dominates.
Historical Transitions:
The Pre-Industrial Norm: For most of human history (Antiquity through the 1800s), growth was stagnant, while land and capital provided steady yields of 4–5%. This created a wide gap that sustained extreme wealth concentration.
The 20th Century “Anomaly”: This was the only period when economic growth and wages rose significantly (due to population booms and productivity gains) while returns on capital assets plummeted due to war-related destruction, inflation, and high progressive taxation. For a brief window, labor income grew faster than capital. (Piketty, 2014)
The Modern Reversion: Since the 1970s, Piketty argues, we are returning to “patrimonial capitalism.” As global growth slows down to its long-term average of 1.5%, the gap \(r > g\) is widening again, allowing inherited wealth to outpace earned wages.
Pictures speak louder than words.
This graph illustrates the typical divergence Piketty describes: when \(r\) (the return on assets) stays constant at 5% while \(g\) (wages/economy) grows at only 1.5%, the wealth-to-income ratio balloons over time.
Piketty’s Policy Recommendations: Addressing the r > g Gap
Piketty’s diagnosis of widening inequality leads directly to a set of bold policy prescriptions. His central argument is that without deliberate intervention, the r > g dynamic will continue to concentrate wealth in fewer and fewer hands, ultimately threatening democratic institutions.
Piketty’s signature proposal is a progressive annual global wealth tax of up to 2%, combined with a progressive income tax of up to 80%. The tax would be levied on net wealth — total assets minus liabilities — and structured progressively, with lower rates on modest fortunes and higher rates on billionaire-scale wealth.
He acknowledges the political difficulty of this proposal, calling a fully global implementation “utopian,” but argues that countries could act incrementally — noting that “countries wishing to move in this direction could very well do so” on their own or in regional coalitions. He envisions Europe as a likely first mover, and calls for international cooperation on automatic sharing of financial data to close enforcement loopholes.
Piketty explicitly defends the wealth tax over alternatives like a consumption tax (favored by critics such as Bill Gates). Piketty’s argument: “A progressive tax on net wealth is better than a progressive tax on consumption because... net wealth is better defined for very wealthy individuals and consumption... is difficult to define.”
He also argues that a wealth tax serves a “contributive justification” — since it is difficult to adequately define the income of the ultra-wealthy, taxing net wealth directly is a more reliable and equitable method.
Piketty calls for a revival of steeply progressive income taxes, noting that the progressive income tax was originally invented in the early 20th century in Europe and the United States — not for revenue purposes, but explicitly to prevent the concentration of wealth associated with hereditary aristocracies.
Piketty points to the mid-20th century as proof of concept: top marginal rates above 80–90% in the U.S. and U.K. coincided with the only sustained period in modern history where g outpaced r.
Piketty’s proposals have attracted significant pushback. Some economists argue that a wealth tax finds little support in either Piketty’s theoretical framework or the broader literature and that a consumption tax may be a more efficient tool for addressing inequality.
Critics from the Tax Foundation contend that a wealth tax could reduce capital formation, potentially shrinking the broader economy and harming middle-class savers — not just the ultra-wealthy — through reduced investment and lower wages.
That argument doesn’t hold in the current US debt economy, where interest on the debt is beginning to spiral and is adding to the debt exponentially.
The gross national debt broke the $39 trillion threshold on March 17, 2026. For comparison, the debt was $34.5 trillion on March 15, 2024 — an increase of $4.5 trillion in just two years. The cost of carrying this debt is staggering. Net interest payments on the national debt are projected to exceed $1 trillion in fiscal year 2026 — nearly triple the $345 billion in interest the government paid in 2020. Net interest has almost tripled over the last five years, and the Congressional Budget Office (CBO) forecasts that net interest as a share of outlays will be 13.85% in FY2026, rising to 14.52% in FY2028.
When a government can’t finance its debt through tax revenues or borrowing alone, it may turn to the central bank to effectively “print money” to cover the gap. This increases the money supply faster than the economy grows, which directly drives up prices — the classic definition of inflation.
Each year’s deficit adds to the already enormous national debt, with interest costs driving further spending growth in a self-reinforcing loop. This is the core of a debt spiral: rising debt → rising interest payments → larger deficits → even more debt. At some point, if investors lose confidence in the government’s ability to repay, they demand even higher interest rates, accelerating the spiral further.
This is why critics from the Tax Foundation (incidentally, closely partnered with the Koch Foundation) are wrong to contend that a wealth tax could reduce capital formation, potentially shrinking the broader economy and harming middle-class savers — not just the ultra-wealthy — through reduced investment and lower wages. Because of inflation, my savings are decreasing in value!
Because low wage earners, the middle class, and those of us on fixed incomes who spend 100% of our incomes back into the economy, and the wealthiest spend under 3% of their wealth into the economy, we are definitely and substantially harmed more by inflation than they are.
Without corrective policies such as steep progressive taxation, Piketty warns of a reversion to “patrimonial capitalism” — a world of low growth and extreme inequality, where inherited wealth dominates, and social mobility stagnates.
We’re now at the point where the wealthy over the past 75 years have managed to take control of the three branches of government and use their power to increase their wealth while chipping away at our rights and the people’s purpose for forming a government.
The Founders were explicit about the purpose. The Preamble to the United States Constitution states:
“We the People of the United States, in Order to form a more perfect Union, establish Justice, ensure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”
Note what the Preamble does not say. It does not say “We the Billionaires.” It does not say “We the Donors.” It says We the People — and it charges the government with promoting the general Welfare and securing the Blessings of Liberty for our Posterity. When billionaire campaign spending has increased by more than 12,000% since 2008, and the wealthiest 1% holds as much wealth as the entire bottom 90% combined, one has to ask: whose welfare is being promoted, and whose liberty is being secured?
References:
Jorda, O., Schularick, M. & Taylor, A. M. (n.d.). The Rate of Return on Everything, 1870–2015. https://conference.nber.org/confer/2017/SI2017/EFGs17/Jorda_Knoll_Kuvshinov_Schularick_Taylor.pdf
Piketty, T. (2014). Capital in the Twenty-First Century. Harvard University Press. https://www.hup.harvard.edu/catalog.php?isbn=9780674430006
Piketty, T., Chancel, L., Gomez-Carrera, R. & Moshrif, R. (December 9, 2025). The ultra-rich are claiming an increasing share of global wealth.
Roeloffs, M. W. (March 8, 2026). The Huge Billionaire Election Influence In Numbers—Nearly One-Fifth Of All Donations. Forbes. https://www.forbes.com/sites/maryroeloffs/2026/03/09/the-huge-billionaire-election-influence-in-numbers-nearly-one-fifth-of-all-donations/
Sterling, A. (March 9, 2026). How 300 billionaires poured $3 billion into the 2024 elections. NationofChange. https://www.nationofchange.org/2026/03/10/how-300-billionaires-poured-3-billion-into-the-2024-elections/
Clement, S., Guskin, E. & Reinhard, B. (November 20, 2025). Most Americans dislike billionaire spending in elections, poll shows. The Washington Post. https://www.washingtonpost.com/politics/2025/11/21/poll-billionaires-elections-campaign-finance/?itid=lk_inline_enhanced-template
Mongiovi, G. (2015). Piketty on Capitalism and Inequality. Review of Radical Political Economics 47(4), pp. 558-565. https://doi.org/10.1177/0486613415584580
Martinez, F. L. & Stockhammer, E. (2014). A Post-Keynesian response to Piketty’s ‘fundamental contradiction of capitalism’. PKES Working Paper 1411. https://www.postkeynesian.net/working-papers/1411/
(2014). Inherited vs self-made wealth: Theory & evidence from a rentier society (Paris 1872–1927). Explorations in Economic History 51, pp. 21-40. https://doi.org/10.1016/j.eeh.2013.07.004
Milanovic, B. (2014). The Return of “Patrimonial Capitalism”: A Review of Thomas Piketty’s Capital in the Twenty-First Century. Journal of Economic Literature 52(2). https://doi.org/10.1257/jel.52.2.519
Thats a breathtaking sophisticated analysis.
Nicely said! and high time someone did it!
It has long puzzled me why it is supposed to be shameful to suggest that taxing the rich is a workable idea. Indeed, it is the only and obvious idea, at this stage of the game.