Somewhere between Elon Musk buying a social media platform and Bernie Sanders introducing a 5% annual wealth tax on the nation's 938 billionaires, the public debate collapsed into a category error. The question everyone keeps arguing is existential: should these people exist? The question that actually produces outcomes is structural: why does the IRS collect more from a firefighter than from a hedge fund manager?
Federal Reserve data shows the top 1% of U.S. households held over 31% of all wealth in 2025, the highest share since tracking began in 1989. The bottom 50% held 2.5%. UC Berkeley economists calculated that the richest Americans pay an effective tax rate of about 24%, while the average household pays around 30%, and high-wage earners closer to 45%. Those numbers are not a coincidence. They describe a system designed around capital gains preferences, carried interest loopholes, and stepped-up basis rules that Congress has defended for decades. The system is the problem. The billionaires are the symptom.
Massachusetts Already Ran the Experiment
Critics of wealth taxes usually invoke capital flight as a dealbreaker. Colin Hathaway, a millionaire businessman in Washington state, told reporters this week that taxing his roofing company's reinvested earnings would push him out of the state. That concern deserves a fair hearing; business investment does respond to tax incentives, and eight states already compete on zero income tax. The evidence does not cooperate with the fear, though. Massachusetts passed its Fair Share Amendment in 2022, a 4% surtax on income above $1 million. It has collected $6 billion for education and transportation since. The predicted exodus did not happen at scale. The rich stayed and paid.
Washington's new income tax on million-dollar earners passed the House this week after an all-night session. California volunteers are circulating signatures for a one-time 5% billionaire wealth tax to cover federal health service cuts. San Francisco and Los Angeles are both pursuing CEO pay ratio taxes at the municipal level. This is not a coordinated left-wing fever dream; it is states improvising fiscal policy because the federal system will not move. That improvisation will produce uneven results, legal challenges, and real administrative headaches. But the alternative is watching the pretax income share of the top 1% continue its 1980-to-now climb from 10% to 22% while Congress debates the estate tax.
The Spectacle Is Doing Real Work, and Not the Good Kind
Here is where the culture criticism matters. The 'should billionaires exist' framing is a product. It gets clicks, it generates outrage, it positions politicians without requiring them to write legislation with teeth. A majority of Republicans, per recent polling, favor raising taxes on the rich. Billionaires themselves funded 19% of all 2024 federal campaign contributions according to the New York Times. The public appetite for reform is real. The cultural performance of the debate converts that appetite into an abstract moral argument about whether a class of people should be permitted to exist, which is both philosophically confused and practically useless.
You cannot legislate a person out of existence. You can legislate that their second billion gets taxed at the same rate as a teacher's salary. The Sanders-Khanna wealth tax proposal, whatever its flaws, at least names a mechanism. The broader cultural conversation mostly produces podcasts.
The Cato Institute is right that wealth tax proponents often overstate revenue projections. That is a real problem worth fixing in the proposal, not a reason to abandon the premise. Close the capital gains loopholes, eliminate stepped-up basis, and enforce the tax code that already exists before announcing a new one. That is the argument. The billionaires are just the distraction.
