Bruce Ackerman and Anne Alstott in the Los Angeles Times:
President Obama is right to insist on the “Buffett rule”: Millionaires should not be paying income tax at a rate lower than their secretaries'. But correcting this inequity is only a small step toward fairness.
The more serious inequality problem facing the United States involves overall wealth, not just income. While the top 1% of Americans earned 21% of the nation's income, they owned a staggering 35% of the wealth in 2006-07, the most recent year for which statistics are available. We should be taxing that wealth directly, and not merely focusing on million-dollar incomes.
We propose a 2% annual wealth tax on households owning more than $7.2 million in net assets. Such a tax would target the 0.5% of Americans at the top of the pyramid, and would yield at least $70 billion a year. This calculation is based on Federal Reserve data that we have updated to take into account the recession's impact on housing and stock prices to 2009. Because we have used very conservative assumptions, the revenue yield could well be higher.
Obama's operational proposal for a “Buffett tax” is vague, so it's hard to predict how much it would raise. But our initiative would generate at least half the $1.5 trillion in deficit reduction that Congress' super-committee is aiming to achieve over the next decade. And the burden would fall on the Americans who have suffered least from the economic downturn.