Wealth, Philanthropy and Politics — Considering 'Wealth Tax' Proposals

By Professor Ellen P. Aprill

This op-ed originally appeared in the Tuesday, October 15, 2019 edition of The Hill.

The impact of private wealth on public policy through tax-exempt organizations has garnered much attention of late, with recent scandals involving the Sacklers, Jeffrey Epstein, and a number of prestigious universities. Recent critiques, however, fail to emphasize sufficiently the role of wealth in campaign finance. Citizens United and the rise, in its wake, of Super PACS able to solicit and spend unlimited amounts make such consideration crucial. Today more than ever, political power of the wealthy means that government spending, like charitable spending, is likely to reflect the interests of the wealthy.

Current proposals for a wealth tax also need to confront this issue. On Sept. 5, as part of the Brookings Papers on Economic Activity, Emmanuel Saez and Gabriel Zucman presented an important new paper on progressive wealth taxation. The Saez-Zucman paper describes a wealth tax as a means of reducing wealth concentration needed because of such concentration’s effect on democratic institutions and policy-making. (The paper notes that political contributions are extremely concentrated, with 1.01 percent of the population accounting for over a quarter of all such contributions.) According to those present, discussion at the session included whether a wealth tax would reduce billionaires’ political influence.

To prevent abuses of a wealth tax, the Saez-Zucman paper proposes that donor advised funds — accounts at public charities for which donors can make recommendations as to the distribution or investment of amounts in the accounts — and funds in private foundations controlled by funders “should be subject to the wealth tax until the time such funds have been spent or moved fully out of the control of the donor.” (The paper leaves to another day the question about how to treat private foundations no longer controlled by the original funder and how to avoid gaming of “control.”)

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