Massachusetts Sen. Elizabeth Warren has grand plans for taxing big fortunes. In January the Democratic presidential candidate unveiled a proposal for a new “ultra-millionaire tax,” an annual tax of 2 percent on household net worth greater than $50 million and 3 percent on net worth greater than $1 billion.
“It’s time to fundamentally transform our tax code so that we tax the wealth of the ultra-rich, not just their income,” Warren said in a statement. “By asking our top 75,000 households to pay their fair share, my proposal will help address runaway wealth concentration and at the same time accelerate badly needed investments in rebuilding our middle class.”
Critics have denounced Warren’s proposal. The Tax Foundation called it “flawed,” the Heritage Foundation labeled it “radical,” and the American Enterprise Institute said it’s “out of step with a business-admiring nation.”
Maybe that’s true: Maybe proposals to soak the rich really are “un-American,” as former Starbucks CEO and Chair Howard Schultz recently said of Democratic New York Rep. Alexandria Ocasio-Cortez’s plan to increase upper-bracket income tax rates. But if so, then someone should tell a few more Americans. In a recent Morning Consult/Politico survey, Warren’s proposal won support from 61 percent of those polled, including 50 percent of Republicans.
In fact, decades of polling suggest that Americans almost always like the idea of raising taxes on the rich. (Notably, however, income tax rate increases underperformed in the Morning Consult/Politico poll; only 45 percent supported Ocasio-Cortez’s plan for a 70 percent marginal tax rate on income exceeding $10 million.)
Moreover, when trying to gauge the “American-ness” of progressive taxation, we don’t need to rely solely on polls. History, too, suggests that progressive taxation is deeply rooted in the American experience. Many American political leaders have made the case for taxing the rich, but for now, let’s consider just one: Thomas Paine, America’s original polemicist and probably the most influential political thinker of the Revolutionary era.
In recent years, Paine has become something of a patron saint for conservative activists, including Glenn Beck (who has a weakness for historical enthusiasms, not all of them well considered). But Paine was no conservative. In fact, were he alive today, Paine would find himself well to the left of many Democrats. As political scientist Sean Monahan wrote in a 2015 article for Jacobin magazine:
Paine was a consistent advocate of a strong federal government and also a sharp critic of economic inequality and poverty who designed the world’s first fully fleshed-out scheme of social welfare provision. Beyond that, he introduced millions to a radical critique of private property and class society, and pointed to democratic politics as the solution.
Paine is best known for his 1776 pamphlet “Common Sense,” which offered a galvanizing case for independence during the crucial early stages of America’s armed rebellion. But Paine was prolific, and some of his most fascinating arguments can be found in less famous works, including “Agrarian Justice.”
In “Agrarian Justice,” Paine argued that poverty is a direct result of property rights, or at least property rights as they had developed in late-18th-century Europe. Poverty “is a thing created by that which is called civilized life. It exists not in the natural state,” Paine wrote.
Humans are born with an equal share in the earth’s “natural property,” Paine explained, by which he meant principally land. When that land was cultivated by individuals, they effectively created a new kind of property in the form of an improvement, but the land itself remained a communal resource. “It is the value of the improvement only, and not the earth itself, that is individual property,” he wrote.
The communal right to natural property implied that the individuals who exploited that property through cultivation owed some sort of rent to everyone else. Paine proposed that that rent be paid as taxes, which in turn would fund social welfare payments. These payments would flow to those members of society who had been effectively deprived of their rights in the communal property.
Paine didn’t begrudge the improvers of communal property their rights to develop it. “I am a friend to riches because they are capable of good,” he wrote. “I care not how affluent some may be, provided that none be miserable in consequence of it.” Indeed, Paine believed that individual development of communal resources was crucial to the survival of an ever-growing population. “Cultivation is at least one of the greatest natural improvements ever made by human invention,” he wrote. “It has given to created earth a tenfold value.”
But individual cultivation of communal property created a moral obligation to compensate those who had been deprived of their share in the jointly held bounty. Paine proposed a system of social welfare payments to satisfy that obligation.
Paine’s call for social welfare wasn’t vague or abstract: He offered a remarkably detailed plan for how the system might work. He suggested the creation of a ”National Fund,” which sounds, to modern ears, much like the trust funds used to support modern U.S. programs like Social Security. From this National Fund, “there shall be paid to every person, when arrived at the age of twenty-one years, the sum of fifteen pounds sterling, as a compensation in part, for the loss of his or her natural inheritance, by the introduction of the system of landed property,” Paine wrote. (The value of that payment today, adjusted for inflation and converted to dollars, would be something like $2,000, according to MeasuringWorth.com.) That lump sum payment for young adults, Monahan noted in his review of Paine’s reformist ideology, resembles more recent proposals for a universal capital grant, including a well-known proposal made by law professors Bruce Ackerman and Anne Alstott in their 2000 book The Stakeholder Society.
Paine’s capital grant was part of an even broader plan to support social welfare and compensate the poor for the (necessary) evils that inevitably flow from private property. He also endorsed an annual old-age pension of £10 for every person over 50. And he insisted that those payments, as well as the capital grant, would go to “every person, rich or poor.” Making such benefits universal was the only way to prevent “invidious distinctions,” he pointed out.
All that spending required a revenue source — these were the days before modern monetary theory freed policymakers from the quotidian annoyance of actually paying for things. And Paine had an answer ready to go. The National Fund would be supported by the “ground rent” collected from cultivators/exploiters. It would take the form of a progressive tax on inheritances, with rates starting at 10 percent for close relatives and rising as the relationship grew more distant.
Paine’s progressive inheritance tax was especially notable because he defined its base to include not simply the value of land under cultivation, but the total of all property, both real and personal. In defending that broad definition of the tax base, Paine offered up a theory of private property that Monahan calls “remarkable.”
Paine contended that personal property was a product not only of personal effort, but of society writ large:
Personal property is the effect of society; and it is as impossible for an individual to acquire personal property without the aid of society, as it is for him to make land originally. Separate an individual from society, and give him an island or a continent to possess, and he cannot acquire personal property. He cannot be rich. So inseparably are the means connected with the end, in all cases, that where the former do not exist the latter cannot be obtained. All accumulation, therefore, of personal property, beyond what a man’s own hands produce, is derived to him by living in society; and he owes on every principle of justice, of gratitude, and of civilization, a part of that accumulation back again to society from whence the whole came.
In making that case, Paine moved well beyond his earlier argument that natural property is held communally by all humans. He was now, just a few pages later, offering a theory of the social construction of wealth that implied even greater obligations for the rich toward their less-fortunate compatriots.
If Paine’s ideas about personal wealth seem familiar, that’s because they have been a fixture of American political and social discourse ever since. In The Gospel of Wealth, industrialist and philanthropist Andrew Carnegie famously remarked that “where wealth accrues honorably, the people are always silent partners.” In 1935 Franklin D. Roosevelt quoted Carnegie while making his own case to Congress for the social construction of wealth — and the taxes applied to it:
The movement toward progressive taxation of wealth and of income has accompanied the growing diversification and interrelation of effort which marks our industrial society. Wealth in the modern world does not come merely from individual effort; it results from a combination of individual effort and of the manifold uses to which the community puts that effort. The individual does not create the product of his industry with his own hands; he utilizes the many processes and forces of mass production to meet the demands of a national and international market.
More recently, we can hear Paine’s ideas echoed in a 2012 speech by Barack Obama:
There is nobody in this country who got rich on his own — nobody. You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory — and hire someone to protect against this — because of the work the rest of us did. Now look, you built a factory and it turned into something terrific, or a great idea. God bless — keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along.
For those later politicians and thinkers — as for Paine — the argument for welfare spending and progressive taxation was based in a broad conception of fairness and human rights. “It is justice, and not charity, that is the principle of the plan,” Paine wrote. Altruism was commendable but hardly sufficient. “With respect to justice, it ought not to be left to the choice of detached individuals whether they will do justice or not,” he added.
That said, Paine was also happy to defend his program in pragmatic terms. Inequality created not simply suffering for the poor, but also danger for the rich. Wealth for the few is often created by exploiting the labor of the masses. That exploitation, in turn, can breed dangerous resentment. “The superstitious awe, the enslaving reverence, that formerly surrounded affluence, is passing away in all countries and leaving the possessor of property to the convulsion of accidents,” he warned:
When wealth and splendor, instead of fascinating the multitude, excite emotions of disgust; when, instead of drawing forth admiration, it is beheld as an insult upon wretchedness; when the ostentatious appearance it makes serves to call the right of it in question, the case of property becomes critical, and it is only in a system of justice that the possessor can contemplate security.
The only way to guarantee the safety of property holders was to compensate the poor for being deprived of natural property rights. “To remove the danger, it is necessary to remove the antipathies, and this can only be done by making property productive of a national blessing, extending to every individual,” Paine concluded.
Ultimately, Paine was both idealist and pragmatist. He argued passionately for the inherent justice of ameliorating poverty, but as a student (and champion) of armed revolution, he understood the necessity of calming social tensions and promoting political cohesion. Republican government, to Paine, was inseparable from broad conceptions of social welfare.
Paine’s proposal of a progressive inheritance tax and substantial social welfare spending doesn’t equate perfectly with modern-day political agendas — not Warren’s or anyone else’s. Nor is it a blueprint for 21st-century political reform.
But it can serve as a reminder that modern proposals for progressive tax reform are hardly un-American or “out of step with a business-admiring nation.” Redistribution — through both taxing and spending — is an ancient element of the American political tradition.