ven a stopped clock is right twice a day, the saying goes. And even a fringe presidential candidate occasionally raises something important. Take Donald Trump's proposal for a wealth tax on households worth at least $10 million, with the proceeds used to pay off the national debt.
Just about everything about Trump's particulars are off - except the basic notion that very large concentrations of wealth should be taxed. For starters, his numbers are wrong.
Trump claims a one-time tax of 14.25 percent on net worth of $10 million of more would raise $5.7 trillion, or enough to pay off the national debt. Trump would exclude housing and bona fide businesses.
For that arithmetic to work, decamillionaires would need to have total wealth of $40 trillion. But the net worth of the entire population, including the value of housing, is only $32 trillion, according to economist Edward Wolff, a leading student of wealth distribution.
Wolfe, who teaches at New York University, calculates that people with more than $10 million have a total of about $6.2 trillion. To get $5.7 trillion from them, you'd need to tax their wealth at rates exceeding 90 percent.
With numbers like these, you can understand how Trump nearly went bankrupt. (You might wonder how he can balance his checkbook, let alone do real estate deals.)
Still, the billionaire developer has shed useful light on an important public issue. Wealth in America is concentrated as never before while social needs go begging.
America can be divided into people who need to ask what things cost and people who don't. In large cities we see a new class of the very, very rich who have entire retinues of servants, as in the gilded age.
They are whisked through the streets in sleek limousines; their kids are taken from elite private school to private music and language lessons by nannies; they have personal trainers and personal shoppers and no worries about balancing household budgets. Given the litany of national needs going unattended - everything from health security to decent public schools - why not tax large concentrations of wealth?
Besides suffering from faulty arithmetic, Trump's version of wealth taxation would put the revenues to the wrong use. We don't need new taxes to pay off the national debt.
Thanks to the federal budget surpluses and the new high-growth economy, the debt is gradually dwindling anyway. At present rates it will be paid off of its own accord in less than 20 years. And it's not even clear that paying off the entire public debt is a good idea.
But a more modest wealth tax, with proceeds dedicated to other public purposes, is a perfectly sensible and feasible idea. Wolff, for example, has proposed a very small wealth tax on net worth of at least $1 million. The tax would begin at one-20th of 1 percent and max out at half of 1 percent for extremely large wealth holdings.
Several European countries, including conservative Switzerland, have long had such a tax. It is, by definition, the most progressive way to raise revenue, since it hits only the very pinnacle of the income distribution.
Wolfe's tax would raise about $50 billion a year; that's not $5.7 trillion, but it's hardly chump change. Another wealth tax on the books and well worth bringing up to date is the estate tax, which now hits the upper middle class more than the rich.
Fewer than 2 percent of estates even pay the tax, and the very wealthy manage to avoid it with trusts and other legal tax avoidance devices. The estate tax currently raises $25 billion a year. Republicans want to scrap it entirely, but it would be more sensible to retarget it to the mega-wealthy.
The fact that households with wealth of $10 million and above own nearly a fourth of all the wealth in America, while the bottom half of Americans have almost no net worth speaks volumes about the kind of society we've become.
Donald Trump knows what it's like to be super-rich, and even though his math is off, he's willing to pay his share. Oddly enough, it has taken a billionaire to raise something as sensible and controversial as taxation of concentrated wealth.
Trump shames that wacky multimillionaire candidate, Steve Forbes, who wants to lower taxes on his fellow plutocrats. Forbes will need tax relief to replace the millions he is spending trying to buy the Republican nomination. Two cheers for Trump.
Robert Kuttner is co-editor of The American Prospect. His column appears regularly in the Globe.
