Guess What You Get When You Tax the Rich? Hint: Revenue

Back in 1933, the journalist-turned-lawyer Wesley Lloyd turned into a new member of Congress from Washington State. Two months into his first term, Lloyd rose to address his fellow lawmakers. They had all, he related, so far applied little more than “palliatives” to the continuing Great Depression.

“We have subsidized the farmer and charged the cost to labor,” Lloyd observed, “and we are attempting to subsidize labor and propose to let the farmer pay the bill.”

What Congress needed to do instead: “lay the ax of legislative enactment at the tap root” of what had gone wrong in America and “place a definite limitation on the acquisition and ownership of wealth.”

“A startlingly small number of our people,” Lloyd charged, had come to enjoy a “vastly major proportion of our national wealth.” His answer: a constitutional amendment giving Congress the power “to limit the wealth” of individual Americans to no more than $1 million, the equivalent of about $23 million today.

“I propose in the main,” said Lloyd, “to bring up the poor and bring down the rich into the class of the average man, where all may find real happiness and where we may know a widespread national prosperity.”

Over the next dozen years, under Franklin Roosevelt’s New Deal, the United States would make historically unprecedented progress toward that greater equality Lloyd so deeply desired. By 1945, America’s richest faced a 94 percent tax rate on income over $200,000. Lloyd, sadly, wouldn’t be around to see that progress. He died early in 1936, midway through his second term.

But Lloyd’s tax-the-rich spirit lives on, especially today in his home Washington State. Earlier this year, 19 of the state’s senators and 43 state reps introduced legislation that would fix a first-ever 1 percent annual tax on stocks, bonds, and other forms of “intangible personal property” worth over $250 million. The Evergreen State currently hosts over 700 grand fortunes that top this quarter-billion mark.

The holders of these massive accumulations have — for now at least — dodged this proposed annual 1 percent tax on their “financial intangible property.” The proposal failed to get through the 2023 state legislative session. But that failure hasn’t left Washington’s deepest pockets feeling like celebrating. The reason? They’ve just become subject to another new tax, a measure that Seattle Times columnist Danny Westneat is describing as the state’s first-ever “wealth-related levy.”

This particular levy, a 7-percent excise tax on asset-sale profits over $250,000, actually became law two years ago, then got shelved when a county court ruled the new tax unconstitutional. This past March, a state Supreme Court ruling reversed that county ruling, and wealthy Washingtonians are now paying up on their new taxes due — at much higher levels than the state’s legislative number-crunchers had anticipated!

Those analysts had expected Washington’s new 7-percent capital gains tax to raise $440 million from the state’s richest. The new tax has instead so far raised $849 million, almost double the take originally anticipated.

Washington’s wealthy still, to be sure, have plenty to be thankful for at tax time. Washington, for instance, remains without an income tax. But no state, we need to remember, has yet come up with what analysts at the Washington, D.C.-based Center for Budget and Policy Priorities would see as a perfect package of tax reforms that prioritize “equity and fairness.”

The Center is now hoping to nudge state lawmakers nationwide further in that direction with a new online tool for developing “State Revenue Options for Advancing Equity and Prosperity.” State policymakers, the Center notes, don’t always understand “how much revenue different policies might raise, whether a tax will fall more on families with low incomes or people at the top.” The new Center tool aims to build that understanding.

Understanding, of course, only takes lawmakers so far. They still have to overcome the opposition of the richest among us to paying anything close to their fair tax share. Lawmakers can certainly do that overcoming — if enough of us push them. And if we do enough of that pushing, maybe our lawmakers will start sounding like Wesley Lloyd back when he proposed to limit the personal wealth of our super richest.

“I do not seek to destroy wealth or industry,” Lloyd told his fellow members of Congress, “but I do propose to place the burden of public expense and national development upon the shoulders of those best able to bear that burden and those who have profited most. I would have the strong help the weak rather than have the weak forever carrying the strong.”