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RAISING TAXES ON THE ULTRARICH  
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Josh Bivens
November 17, 2025
Economic Policy Institute
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_ A necessary first step to restore faith in American democracy and
the public sector _

, Wikimedia Commons

 

SUMMARY  

The public has supported raising taxes on the ultrarich and
corporations for years, but policymakers have not responded. Small
increases in taxes on the rich that were instituted during times of
Democratic control of Congress and the White House have been
consistently swamped by larger tax cuts passed during times of
Republican control. This was most recently reflected in the massive
budget reconciliation bill pushed through Congress exclusively by
Republicans and signed by President Trump. This bill extended the
large tax cuts first passed by Trump in 2017 alongside huge new cuts
in public spending. This one-step-forward, two-steps-back dynamic has
led to large shortfalls of federal revenue relative to both existing
and needed public spending.

Raising taxes on the ultrarich and corporations is necessary for both
economic and political reasons. Economically, preserving and expanding
needed social insurance and public investments will require more
revenue. Politically, targeting the ultrarich and corporations as
sources of the first tranche of this needed new revenue can restore
faith in the broader public that policymakers can force the rich and
powerful to make a fair contribution. Once the public has more faith
in the overall fairness of the tax system, future debates about taxes
can happen on much more constructive ground.

Policymakers should adopt the following measures:

* Tax wealth (or the income derived from wealth) at rates closer to
those applied to labor earnings. One way to do this is to impose a
wealth tax on the top 0.1% of wealthy households.
* Restore effective taxation of large wealth dynasties. One way to
do this would be to convert the estate tax to a progressive
inheritance tax.
* Impose a high-income surtax on millionaires.
* Raise the top marginal income tax rate back to pre-2017 levels.
* Close tax loopholes for the ultrarich and corporations.

INTRODUCTION

The debate over taxation in the U.S. is in an unhealthy state. The
public is deeply distrustful of policymakers and doesn’t believe
that they will ever put typical families’ interests over those of
the rich and powerful. In tax policy debates, this means that people
are often highly skeptical of any proposed tax increases, even when
they are told it will affect only (or, at least, overwhelmingly) the
very rich. People are also so hungry to see _any_ benefit at all, no
matter how small, that they are often willing to allow huge tax cuts
for the ultrarich in tax cut packages if those packages include any
benefit to them as well. The result has been a continued downward
ratchet of tax rates across the income distribution.1
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This is a terrible political dynamic for U.S. economic policy, given
the pressing national needs for more revenue.

As countries get richer and older, the need for a larger public sector
naturally grows.2
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Yet the share of national income collected in taxes by the U.S.
government has stagnated since the late 1970s. This has left both
revenue and public spending in the United States at levels far below
those of advanced country peers.3
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This stifling of resources available for the public sector is not only
inefficient but has led to frustration over its inability to perform
basic functions. The political root of this suppression of resources
for the public sector is a series of successful Republican pushes to
lower tax rates for the richest households and corporations. This
attempt to use tax policy to increase inequality has amplified other
policy efforts that have increased inequality in pre-tax incomes,
leading to suppressed growth in incomes and declining living standards
for low- and middle-income households and a degraded public sector.4
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In recent decades the dominant strategy for many on the center–left
to combat the public’s tax skepticism is to pair tax increases with
spending increases for programs that lawmakers hope will be popular
enough to justify the taxes. This strategy has worked in the sense
that some tax increases have been passed in the same legislation that
paid for valuable expansions of income support, social insurance, and
public investment programs in recent years. But this strategy has not
stopped the damaging political dynamic leading to the sustained
downward ratchet of tax revenue and the tax rates granted to the
ultrarich and corporations.5
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Part of the problem with a strategy of trying to attach tax increases
to allegedly more popular spending increases is that it takes time for
spending programs to _become_ popular. The Affordable Care Act (ACA),
for example, was not particularly popular in the year of its passage
but has survived numerous efforts to dislodge it and has seemingly
become more popular over time. Conversely, the expanded Child Tax
Credit (CTC) that was in effect in 2021 and cut child poverty in half
only lasted a single year, so there was little organic public pressure
on Congress to ensure it continued.

In this report, we suggest another strategy for policymakers looking
to build confidence in the broader public that tax policy can be made
fairer: Target stand-alone tax increases unambiguously focused on
ultrarich households and corporations as the first priority of fiscal
policy. The revenue raised from this set of confidence-building
measures can be explicitly aimed at closing the nation’s fiscal gap
(the combination of tax increases or spending cuts needed to stabilize
the ratio of public debt to national income).6
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Once this gap has been closed with _just_ highly progressive taxes,
the public debate about the taxes needed to support valuable public
investments and welfare state expansions should be on much more
fruitful ground.

This approach takes seriously the work of scholars like Williamson
(2017), who argue that the U.S. public is not rigidly “anti-tax.”
Indeed, this public often views taxpaying as a civic responsibility
and moral virtue. Yet they have become convinced that too many of
their fellow citizens are not making a fair and adequate contribution.
Part of this perception rests on underestimating the taxes paid by the
poor and working people, but a good part of this perception also rests
on the accurate impression that many rich households and corporations
are not paying their fair share. Policy can change this latter
perception, particularly if the policy is explicitly identified with
ensuring that the rich and corporations—and _only_ the rich and
corporations—will see their taxes increase.

The rest of this report describes a number of tax policy changes that
would raise revenue from the rich and corporations with extremely
small (often zero) spillover into higher taxes for anybody else. It
also provides rough revenue estimates of how much each could raise. It
is not exhaustive, but it demonstrates that the nation’s current
fiscal gap could certainly be closed with only taxes on the very rich.
Making this policy agenda and target explicit could go a long way to
restoring trust and improving the quality of the debate about taxes.

TARGETING THE ULTRARICH

The vast majority (often 100%) of the tax policy changes discussed
below would only affect the taxes paid by the top 1% or above (those
making well over $563,000 in adjusted gross income in 2024). Many of
the taxes—and the vast majority of the revenue raised—will
actually come from households earning well above this amount. We will
be more specific about the incidence of each tax in the detailed
descriptions below. The tax policy changes fall into two categories:
increasing the tax rates the rich and ultrarich pay and closing the
tax loopholes they disproportionately benefit from. We first present
the tax rate changes, and we list them in declining order of
progressivity.

Both the rate changes and the loophole closers disproportionately
focus on income derived from wealth. By far the biggest reason why
rich households’ tax contributions are smaller than many Americans
think is appropriate has to do with rich households’ source of
income. So much of these households’ income derives from wealth, and
the U.S. federal tax system taxes income derived from wealth more
lightly than income derived from work. If policymakers are unwilling
to raise taxes on income derived from wealth, the tax system can never
be made as fair as it needs to be.

 
LEVYING A WEALTH TAX ON THE TOP 0.1% OR ABOVE OF WEALTHY HOUSEHOLDS

The WhyNot Initiative (WNI) on behalf of Tax the Greedy Billionaires
(TGB) has proposed a wealth tax of 5% on wealth over $50 million, with
rates rising smoothly until they hit 10% at $250 million in wealth and
then plateauing. With this much wealth, even a household making just a
1% return on their wealth holdings would receive an income that would
put them in the top 1% of the income distribution. A more realistic
rate of return (say, closer to 7%) would have them in the top 0.1% of
income.

The $50 million threshold roughly hits at the top 0.1% of net worth
among U.S. families, so this tax is, by construction, extremely
progressive—only those universally acknowledged as extremely wealthy
would pay a penny in additional tax. The WNI proposal also imposes a
steep exit tax, should anybody subject to the tax attempt to renounce
their U.S. citizenship to avoid paying it.

The Tax Policy Center (TPC) has estimated that the WNI wealth tax
could raise $6.8 trillion in additional net revenue over the next
decade, an average of $680 billion annually. In their estimate, the
TPC has accounted for evasion attempts and the “externality” of
reduced taxes likely to be collected on income flows stemming from
wealth holdings. Despite accounting for these considerations, the $6.8
trillion in revenue over the next decade could completely close the
nation’s current estimated fiscal gap.

A key consideration in the long-run sustainability of revenue
collected through a wealth tax is how quickly the tax itself leads to
a decline in wealth for those above the thresholds of the tax. If, for
example, the tax rate itself exceeded the gross rate of return to
wealth, wealth stocks above the thresholds set by the tax would begin
shrinking, and there would be less wealth to tax over time. The Tax
Policy Center’s estimate includes a simulation of this decumulation
process, assuming an 8.5% rate of return.7
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It finds only very slow rates of decumulation.

Other simulation results (like those in Saez and Zucman 2019b) find
faster decumulation for wealth taxes as high as this, but even their
findings would still support the significant revenue potential of a
wealth tax targeted at sustainability. Whereas the WNI wealth tax
raises roughly 2.2% of GDP over the next 10 years, the Saez and Zucman
(2019a) results highlight that over half this much could essentially
be raised in perpetuity.8
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It is important to note that even if revenue raised from any given
wealth tax came in lower than expected due to the decumulation of
wealth, this decumulation is itself highly socially desirable. The
wealth would not be extinguished. It would instead accumulate to other
households throughout society. An analogy is carbon taxes targeted at
lowering greenhouse gas emissions. If a carbon tax were implemented
and the revenue it raised steadily fell over time, this would be a
sign of success, as the primary virtue of such a tax is not the
long-run revenue it can raise but the behavioral changes it can spur,
such as switching to less carbon-intensive forms of energy generation
and use.

The benefits from wealth decumulation could be profound. For one, much
of the rise in wealth in recent decades has been the result of a
zero-sum transfer of income claims away from workers and toward
capital owners (Greenwald, Lettau, and Ludvigson 2025). To the degree
that higher wealth taxes make these zero-sum transfers less desirable
for privileged economic actors, the imperative to keep wages
suppressed and profits higher will be sapped, leading to a broader
distribution of the gains of economic growth.

Further, highly concentrated wealth leads naturally to highly
concentrated political power, eroding the ability of typical families
to have their voices heard in important political debates (Page,
Bartels, and Seawright 2013). Studies show that popular support for
democratic forms of government is weaker in more unequal societies,
demonstrating that a greater concentration of wealth can lead to the
erosion of democracy (Rau and Stokes 2024).

CONVERTING THE ESTATE TAX TO A PROGRESSIVE INHERITANCE TAX

The estate tax in the United States currently only applies to estates
of more than $11.4 million. At the end of 2025 it would have reverted
to pre-2017 levels of roughly $7 million, but the Republican budget
reconciliation bill passed in 2025 will raise it to a level more than
twice as high starting in 2026—at $15 million. The 40% estate tax
rate applies on values above these thresholds.

The estate tax threshold has been increased significantly since 2000,
with changes in 2001, 2012, 2017, and 2025 all providing large
increases. In 2000 the threshold for exemption was under $1 million,
and the rate was 55%. If the 2000 threshold were simply updated for
inflation, it would have been $1.3 million today, instead of $11.4
million. At this $1.3 million threshold and with a 55% rate, the
estate tax would raise roughly $75 billion more in revenue this year
than it is currently projected to.9
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In short, our commitment to taxing wealthy estates and their heirs has
eroded substantially in recent decades.

Batchelder (2020) proposes a new tax on inheritances that would
replace the estate tax. Batchelder’s inheritance tax would not fall
on the total value of the estate, but simply the portion of it
inherited by individual heirs. Her proposal is to tax inheritances of
various thresholds as ordinary income. Because the tax would be
triggered by the lifetime level of gifts and inheritances, it cannot
be avoided just by using estate planning to time these bequests and
gifts. For a threshold of $1 million, the tax would raise roughly
0.35% of gross domestic product annually, or roughly $1 trillion over
the next decade.

An inheritance tax is naturally more progressive than an estate tax.
To see why, imagine an estate of $5 million that faced 2000-era estate
tax rules. An estate tax would lower the value of the inheritance to
all heirs by an amount proportional to the tax. Conversely, under an
inheritance tax, the effective rate of the tax felt by heirs would be
significantly different if the estate was spread among 10 heirs (each
receiving $500,000 and, hence, not even being subject to the
Batchelder inheritance tax that starts at $1 million) versus being
spread among two heirs (each receiving $2.5 million and paying an
inheritance tax). Fewer heirs for a given estate value imply a larger
inheritance and, hence, a higher inheritance tax (if the inheritance
exceeds the tax’s threshold).

IMPOSING A HIGH-INCOME SURTAX ON MILLIONAIRES

Probably the most straightforward way to tightly target a tax on a
small slice of the richest taxpayers is to impose a high-income
surtax. A surtax is simply an across-the-board levy on all types of
income (ordinary income, business income, dividends, and capital
gains) above a certain threshold. As such, there is zero possibility
that lower-income taxpayers could inadvertently face any additional
tax obligation because of it.

A version of such a high-income surtax was actually a key proposed
financing source for early legislative versions of the Affordable Care
Act. The bill that passed the House of Representatives included such a
surtax.10
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This surtax was replaced with other revenue sources during the
reconciliation process between the House and Senate versions.

One proposal is to enact a 10% surtax on incomes over $1 million. This
would affect well under 1% of households (closer to 0.5%). Using data
from the Statistics of Income (SOI) of the Internal Revenue Service
(IRS), we find that roughly $1.55 trillion in adjusted gross income
sat over this $1 million threshold among U.S. households in 2019.11
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A purely static estimate with no behavioral effects, hence, would
argue that $155 billion annually (10% of this $1.55 trillion) could be
raised from this surcharge. In tax scoring models (like that of the
Tax Policy Center or the Joint Committee on Taxation), behavioral
effects tend to reduce estimates roughly 25% below such static
estimates. Applying such a discount would still suggest that the
revenue potential of a high-income surtax with a $1 million threshold
could be $1.5 trillion over the next decade.

RAISING THE TOP MARGINAL INCOME TAX RATE BACK TO PRE-TCJA LEVELS

During the Clinton and Obama administrations, the top marginal tax
rate on ordinary income was increased to 39.6%. During the George W.
Bush and the first Donald Trump administrations, it was reduced and
currently sits at 37%. This lower marginal top rate would have expired
at the end of 2025, but the Republican budget reconciliation bill,
passed by Congress and signed by Trump in July 2025, ensured that it
would stay at 37%.

In 2025 the bracket that this top tax rate applies to will begin at
$626,350 for single filers and joint filers. This is well under 1% of
taxpayers. If the bracket for top tax rates was dropped to $400,000
and the rate was raised to 39.6%, the Tax Policy Center has estimated
that this could raise roughly $360 billion over the next decade.
Earlier in 2025, there were reports that Republicans in Congress were
thinking about letting the top tax rate revert to the level it was at
before the 2017 Tax Cuts and Jobs Act (TCJA). This was touted as
members of Congress breaking with their party’s orthodoxy and
actually taxing the rich. On the contrary, the new top marginal tax
rate now applies to joint filers at an even _lower_ level than
pre-TCJA rates.

As can be seen in TABLE 1, pushing the top marginal rate on ordinary
income to pre-TCJA levels is one of the weakest tools we have for
raising revenue from the rich. The reason is simple. A large majority
of the income of the rich is not ordinary income; it is income derived
from capital and wealth, and, hence, only changing the tax rate on
ordinary income leaves this dominant income form of the rich
untouched.

CORPORATE TAX RATE INCREASES

In 2017 the TCJA lowered the top rate in the corporate income tax from
35% to 21%, and the 2025 Republican budget reconciliation bill
extended that lower 21% rate. The 35% statutory rate that existed
pre-TCJA was far higher than the _effective_ rate actually paid by
corporations. Significant loopholes in the corporate tax code allowed
even highly profitable companies to pay far less than the 35%
statutory rate.

But at the same time the TCJA lowered the statutory rate, it did
little to reduce loopholes—the gap between effective and statutory
rates after the TCJA’s passage remains very large.12
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Clausing and Sarin (2023) have estimated that each 1 percentage point
increase in the top statutory tax rate faced by corporations raises
over $15 billion in the first years of the 10-year budget window.
Raising today’s 21% top rate back to the 35% rate that prevailed
before the TCJA would, hence, raise roughly $2.6 trillion over the
next decade.

The immediate legal incidence of corporate taxes falls on
corporations, the legal entities responsible for paying the taxes.
However, the _economic_ incidence is subject to more debate. The
current majority opinion of tax policy experts and official
scorekeepers like the Joint Tax Committee (JTC) is that owners of
corporations (who skew toward the very wealthy) bear most of the
burden of corporate tax changes.13
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But some small share of the corporate tax rate’s incidence is often
assigned to workers’ wages, as there are some (speculative) reasons
to think a higher corporate tax rate leads in the long run to lower
wage income. The economic reasoning is that if the higher corporate
tax rates lead to less economywide investment in tangible structures,
equipment, and intellectual property, then this could slow economywide
productivity growth. This slower productivity growth could, in turn,
reduce wage growth for workers.

However, newer research highlights that there are good reasons to
think that corporate tax rate increases have zero—or even
positive—effects on private investment in structures, equipment, and
intellectual property. Brun, Gonzalez, and Montecino (2025,
forthcoming) argue that once one accounts for market power (either in
product or labor markets) of corporations, corporate taxes fall, in
part, on nonreproducible monopoly rents. To provide an example, a
large share of Amazon’s profits is not just due to the size of the
firm’s capital stock but its considerable monopoly power in many
business segments. This market power allows them to charge higher
prices than they could in competitive markets, and these excess prices
represent a pure zero-sum transfer from consumers, not a normal return
to investment.

Increasing taxes on these monopoly rents can reduce stock market
valuations of firms and actually lower the hurdle rate for potential
competitors assessing whether to make investments in
productivity-enhancing capital. This can actually boost investment and
productivity economywide, and if investment and productivity rise (or
just do not fall) in response to corporate tax increases, this implies
that none of the economic incidence of a corporate tax increase falls
on anybody but the owners of corporations.

In short, despite some mild controversy, it seems very safe to assume
that increases in the corporate income tax rate both are and would be
perceived by the public as extremely progressive.

CLOSING TAX LOOPHOLES THAT THE ULTRARICH AND CORPORATIONS USE

As noted above, it’s not just falling tax rates that have led to
revenue stagnation in recent decades. There has also been an erosion
of tax bases. Growing loopholes and increasingly aggressive tax
evasion strategies have put more and more income out of the reach of
revenue collectors. It goes almost without saying that the vast
majority of revenue escaping through these loopholes and aggressive
tax evasion strategies constitutes the income of the very rich and
corporations.

These types of loopholes are unavailable to typical working families
because their incomes are reported to the Internal Revenue Service.
Typical working families rely on wage income, which is reported to the
penny to the IRS, and families pay their legally obligated tax amount.
Income forms earned by the ultrarich, however, often have very spotty
IRS reporting requirements, and this aids in the evasion and
reclassification of income flows to ensure the ultrarich are taxed at
the lowest rates.14
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Shoring up tax bases by closing loopholes and engaging in more robust
enforcement are key priorities for ensuring the very rich pay a fair
and substantial contribution to the nation’s revenue needs.

CLOSING LOOPHOLES THAT ALLOW WEALTH GAINS AND TRANSFERS BETWEEN
GENERATIONS TO ESCAPE TAXATION

The wealthy use a number of strategies to escape taxation of the
income they generate and to allow assets to be transferred to their
heirs. Below we discuss three such strategies and provide a score for
a consolidated package of reforms aimed at stopping this class of tax
strategies—$340 billion over the next decade.

 
ENDING THE STEP-UP IN BASIS UPON DEATH OR TRANSFER OF ASSETS

This is best explained with an example. Say that somebody bought
shares of a corporation’s stock in the early 1980s for $1 per share.
They held onto it for decades until it reached $501 per share. Since
they never realized this capital gain by selling the stock, they were
never taxed on their growing wealth. Now, say that they transferred
these stock holdings to their children decades later. Because it is no
longer the original buyer’s property, it would not be assessed as
part of an estate subject to the estate tax. If their children
subsequently sold the stock, current law would allow a step-up in
basis, which means the capital gain they earned from selling the stock
would only be taxed on the gain over and above the $501 per share
price that prevailed _when they received the stock_, not the original
$1 per share price.

So, if children sold their stock gift for $501 per share, they would
owe zero tax. And for the family as a whole, the entire (enormous)
capital gain that occurred when the share appreciated from $1 to $501
is_ never _taxed. This allows huge amounts of wealth to be passed down
through families without the dynasty’s ever paying appropriate
taxes, either capital gains taxes or estate taxes.

An obvious solution to this problem is simply to not grant the step-up
in basis when the asset is transferred. That is, when the children
receive the stock in the example above, any subsequent sale should be
taxed on any capital gain calculated from the $1 originally paid for
the stock. In the case above, the children would have had to pay a
capital gains tax on the full value between $1 and $501 if they had
sold the stock for $501.

Besides raising money directly through larger capital gains values,
ending the step-up in basis can also cut down on many tax engineering
strategies that wealthy families undertake to avoid taxation.
Estimates for the revenue that could be raised by enacting this change
are quite varied, but they tend to sit between $15 billion and $60
billion in 2025.15
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We estimate this would raise $190 billion over the next decade.

An alternative solution getting at the same problem would be to make
the death of a wealth holder a realizable event. Essentially, for the
purposes of taxation, it would be assumed that all assets were sold by
a wealth holder upon their death, and the appropriate rate of capital
gains taxation would then be collected.

MAKING BORROWING A REALIZABLE EVENT

A related reform would make the pledging of any asset as collateral
against a loan a realizable event. In the example above, as the
original holder of the stock held the shares and did not sell them
over a long period of time, this raises an obvious question of how
this family is financing their current consumption without liquidating
any wealth. They could, of course, be earning labor income. But the
very wealthy often finance current consumption by taking out loans and
using the value of their wealth as collateral. So long as the interest
rates on the loans are lower than the rate of return on the wealth
being pledged as collateral, they can enjoy high and rising
consumption and still see considerable wealth appreciation. This is a
particularly useful strategy during periods of low interest rates
(like most of the past 25 years) and for owners of newer corporations
that are growing rapidly (think Jeff Bezos and Amazon during the
2000s). This use of debt as a strategy of avoiding capital gains
realization has often been called the “Buy, Borrow, Die” strategy.

An obvious reform to stop this would be to force wealth holders to
treat pledging an asset as collateral as a realization event for this
asset. When the wealth holder goes to financiers to get loans and
pledges their shares as collateral, the wealth holder would pay a
capital gains tax on the difference in the value of the stock between
when they originally bought it and the value the day it is pledged for
collateral. The amount of revenue this would raise would be small in
the grand scheme of the federal budget, roughly $60 billion over the
next decade. But it would provide one more block to a common tax
evasion strategy for the ultrarich, and this could show up in more
revenue collected through other taxes.

CLOSING LOOPHOLES THAT ERODE ESTATE OR INHERITANCE TAX BASES

Hemel and Lord (2021) identify estate planning mechanisms that reduce
the base of the current estates taxes, including the abuse of grantor
retained annuity trusts (GRATs) and excessively preferential tax
treatment of transfers within family-controlled entities. Under
current law, wealthy individuals establishing a trust for their
descendants may calculate the taxable gift amount of the trust by
subtracting the value of any qualified interest. This qualified
interest includes any term annuity retained by the grantor of the
trust. The annuity is based on market interest rates prevailing when
the trust was established. When interest rates are low, this becomes
an extremely valuable deduction.

Hemel and Lord (2021) give the example of a grantor establishing a
$100 billion trust but retaining a two-year annuity payment of $50.9
million based on the 1.2% interest rate prevailing in 2021. This
taxpayer would be able to subtract this annuity from their taxable
gift calculation, effectively paying no gift tax. If the assets in the
trust grew faster than 1.2%, then the trust would have assets left
over after two years, and these could be passed to the beneficiaries
free of any transfer tax (as these assets came from the trust, not the
original grantor). If assets in the trust grew more slowly than this
amount, then the trust would be unable to make its full final annuity
payment and would be declared a failed trust and would trigger no
estate or gift tax consequences. In this case, the original grantor
could simply try again to construct a short-term irrevocable trust
that would succeed in transferring income to heirs without triggering
a gift tax.

Hemel and Lord (2021) recommend repealing the law that allows for this
deduction of qualified interest from gift or transfer taxes applying
to GRATs. They also argue for reducing the preferential treatment of
transfers within family-controlled entities. The full package of
reforms to estate planning that they recommend would raise $90 billion
over the next decade.

CLOSING THE LOOPHOLE FROM AMBIGUITY BETWEEN SELF-EMPLOYMENT AND NET
INVESTMENT INCOME

As part of the Affordable Care Act, a 3.8% tax was assessed on income
above $200,000 (for single filers and $250,000 for joint filers). If
this income is earned as wages or self-employment income, this tax is
paid through the Federal Insurance Contributions Act (FICA) or the
Self-Employment Contributions Act (SECA) taxes. If the income is
received as a dividend or interest payment or royalty or other form of
investment income, the tax is paid as a Net Investment Income Tax
(NIIT). The clear intent is for income of all forms to be assessed
this tax.

Somehow, however, some business owners (mostly those owning limited
partnerships and S corporations—corporations with a limited number
of shareholders who are required to pass through all profits
immediately to owners) have managed to classify their income as not
subject to FICA, SECA, or the NIIT.16
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A number of policy options could close this unintended gap and raise
nontrivial amounts of revenue—roughly $25 billion in 2025.
Importantly, the revenue collected by this loophole closing would go
directly to the Medicare trust fund.

INTERNATIONAL CORPORATE TAX REFORM

Before the TCJA, the biggest loophole by far in the corporate income
tax code was U.S. corporations’ ability to defer taxes paid on
profits earned outside the United States. In theory, once these
profits were repatriated, taxes would be levied on them. However,
financial engineering meant that there was little need to repatriate
these profits for reasons of undertaking investment or stock buybacks
or anything else corporations wanted to do.17
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Further, corporations routinely lobbied for repatriation holidays,
periods of time when they were allowed to repatriate profits at a
reduced rate. One such holiday was passed by Congress and signed into
law by George W. Bush in 2004.

Between 2004 and 2017, pressure for another such holiday ramped up as
more and more firms deferred corporate taxes by holding profits
offshore. The TCJA not only provided such a holiday for past profits
kept offshore, it also made profits booked overseas mostly exempt from
U.S. corporate taxes going forward. In essence, the TCJA turned
deferral into an exemption.

This TCJA exemption of foreign-booked profits was subject to small
bits of tax base protection. But they have been largely ineffective.
The 2025 budget reconciliation bill would further exacerbate these
problems, reducing taxes on foreign income even more.

Clausing and Sarin (2023) recommend a suite of corporate reforms that
aims to level the playing field between firms booking profits in the
United States versus overseas. Key among them would be to reform the
Global Intangible Low-Taxed Income (GILTI) tax rate, a rate introduced
in the TCJA, to ensure that financial engineering would not allow
large amounts of corporate income earned by U.S.-based multinationals
to appear as if they were earned in tax havens.18
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The GILTI is essentially a global minimum tax rate for U.S.
multinationals. But the rate (10.5% in 2024 and 12.6% in 2025) is far
too low to effectively stop this kind of tax haven-shopping for
corporations, much lower than the 15% minimum rate negotiated by the
OECD and agreed to by the Biden administration in 2022.

In addition, multinationals are currently allowed to blend all their
foreign tax obligations globally and take credits for foreign
corporate income taxes paid. So, taxes paid on a company’s actual
manufacturing plant in, say, Canada, can count toward the GILTI
contribution of a multinational, even if they then used financial
engineering to shift most of their paper profits to tax havens like
the Cayman Islands.

Raising the GILTI rate and applying it on a country-by-country basis
would go a long way to preserving the base of the U.S. corporate
income tax in the face of tax havens. The Clausing and Sarin (2023)
suite of reforms would raise $42 billion in 2025.

BUILDING UP IRS ENFORCEMENT CAPABILITIES AND MANDATES

In 2022, the IRS estimated that the tax gap (the dollar value of taxes
legally owed but not paid in that year) exceeded $600 billion. The
richest households account for the large majority of this gap. The IRS
in recent decades has lacked both the resources and the political
support to properly enforce the nation’s tax laws and collect the
revenue the richest households owe the country.

Due to this lack of resources and mandates, the IRS instead often took
the perverse approach of leveraging enforcement against easy
cases—easy both in terms of not taking much capacity and of not
generating intense congressional backlash.19
[[link removed]]
In practice, this meant intensively auditing recipients of refundable
tax credits to look for improper payments. Tax credits are refundable
when the amount of a credit (say, the Child Tax Credit) is larger than
the taxpayer’s entire income tax liability. In this case, the credit
does not just reduce income tax liability; it will also result in an
outright payment (hence, refundable) to the taxpayer claiming it.
Recipients of these refundable tax credits are, _by definition,_
low-income taxpayers—those with low income tax liability. Besides
making the lives of these low-income households more anxious, these
audits also just failed to generate much revenue—again, because the
group being audited was generally low income and didn’t owe
significant taxes in the first place.

The Biden administration included significant new money to boost IRS
enforcement capacity as part of the 2022 Inflation Reduction Act
(IRA). This extra enforcement capacity was paired with new mandates to
reduce the tax gap by increasing enforcement efforts on rich
taxpayers.

However, the IRA additions to IRS resources were already being
chiseled away before the 2024 presidential election. The Trump
administration clearly has no interest in whether or not the IRS
consistently enforces revenue collection from the rich. The budget
reconciliation bill that Republicans passed through Congress in July
rolled back the expanded funding for IRS enforcement. Trump’s
proposed fiscal year 2026 budget for IRS funding would chip away at
that even further. 

The IRS has also not been immune to the Trump administration’s
attempt to make life miserable for federal employees. The agency has
lost a quarter of its workforce since 2025 to layoffs, the deferred
resignation offer pushed by Elon Musk’s so-called Department of
Government Efficiency, early retirements, and other separations (TIGTA
2025).

The sharp turn away from the Biden administration’s support of the
IRS represents a missed opportunity. While it would be near impossible
to fully close the tax gap, Sarin and Summers (2019) estimate that
some modest and doable steps could reliably collect significantly over
$100 billion per year over the next decade from increased enforcement
efforts.

HOW MUCH COULD A CAMPAIGN OF CONFIDENCE-BUILDING MEASURES TO TAX THE
ULTRARICH RAISE?

These measures to enact a series of tax reforms laser-targeted at only
the rich could raise significant revenue. One obvious benchmark
suggests itself: the current fiscal gap. The fiscal gap is how much
(as a share of GDP) taxes would need to be raised or spending would
need to be cut to stabilize the ratio of public debt to GDP. Today
this gap stands at roughly 2.2%.

Table 1 gives a rough score for each of the provisions mentioned
above. It then conservatively estimates the combined revenue-raising
potential of this package. It assumes that the whole policy package is
equal to 70% of the sum of its parts. This would help account for some
fiscal “externalities” (i.e., taxing wealth means wealth grows
more slowly over time and, hence, reduces tax collections on income
earned from wealth going forward). It also would help account for some
potentially duplicative effects that could reduce some revenue
collected by the combination of these reforms. For example, if the
step-up in basis were eliminated, the incentive for rich households to
finance consumption with loans would be reduced, so the revenue
generated by treating the pledging of collateral as a realizable event
would likely be reduced.

 

This combination of confidence-building measures to tax the rich would
unambiguously be able to close the nation’s current fiscal gap. The
sum of the parts of this agenda would raise roughly 4% of GDP over the
long run, and even if the sharp 30% discount on the sum of these parts
was applied, it is still just under 3% of GDP. Telling the American
public that this package of tax increases on the ultrarich had put the
nation on a fully sustainable long-run trajectory while still leaving
enough money to fund something as large as universal pre-K for 3- and
4-year-olds or a radical increase in more generous coverage in the
nation’s unemployment insurance system could be seismic for changing
the tax debate in the United States.

For those like us who advocate for even larger expansions of the U.S.
system of income support, social insurance, and public investment, the
future political debate over how to finance them would be on much more
favorable ground with the public’s support. The conditions of the
debate would change if the public could shake the (too often true)
impression that the U.S. government is failing to ask the ultrarich
and corporations to do their part to contribute to the nation’s
fiscal needs.

CONCLUSION

Obviously, this program of laser-targeting tax increases on the
ultrarich is not the policy of the current Trump administration or the
Republican majority in Congress. They have already spent the first
half of 2025 forcing through a monster of a reconciliation bill, which
extended the expiring provisions of the TCJA, provisions that provide
disproportionate benefits to the very rich. The reconciliation bill
represents a shocking upward redistribution of income from the very
poor to the very rich, paying for trillions of dollars in tax cuts
that primarily benefit the wealthy by stripping health care and food
assistance from millions of Americans. 

But as damaging as extending these expiring provisions will be to tax
fairness and economic outcomes, they might be even more damaging to
the public’s confidence that tax policy can ever be reoriented to
ensure that the ultrarich and corporations pay their fair share.
Instead, the debate over the expiring provisions will draw attention
to two facts. First, the large majority of U.S. households will see a
tax cut (relative to current law), but these cuts will be much larger
for the rich. For example, the bottom 60% of households will see a tax
cut of just over $1 per day, while the top 1% will see a cut of $165
per day, and the top 0.1% will see a whopping $860 per day. Second,
these regressive tax cuts are bundled with spending cuts that will
sharply reduce incomes for the people in the bottom half of the income
distribution, leaving them net losers overall.

This combination of facts will continue to feed perceptions that the
only way typical households can get something—anything—out of tax
policy debates is if they settle for crumbs from the feast enjoyed by
the richest. And even these crumbs will be taken back in the form of
cuts elsewhere.

It’s time to reverse these perceptions. If policymakers engage in a
confidence-building set of measures to raise significant revenue only
from the ultrarich, the public’s stance toward tax policy can be
changed from being anti-tax to being willing to have debates about the
pros and cons of public sector expansions, content in the knowledge
that the very rich will neither escape their obligations nor claim the
lion’s share of benefits yet again.

NOTES

1.
[[link removed]]Obviously
not all of this downward ratchet is bad. The steep decline in tax
rates for the poorest families, driven by expanding Earned Income and
Child Tax credits, has been a very welcome policy development in
recent decades.

2.
[[link removed]]The
strong relationship between the level of gross domestic product (GDP)
per capita and the share of the public sector in a nation’s economy
is recognized enough to have been named: Wagner’s Law.

3.
[[link removed]]On
the relative smallness of the U.S. fiscal state (both spending and
taxation as shares of GDP), see EPI 2025.

4.
[[link removed]]Bivens
and Mishel 2021 note the number of intentional policy changes outside
the sphere of taxation that have driven much of the growth in pre-tax
inequality.

5.
[[link removed]]For
example, both the Affordable Care Act (ACA) and the Inflation
Reduction Act (IRA) paid for the additional spending on public
investments and income support programs they called for with new
taxes. That said, because Republican-driven tax cuts were passed in
the interim, the upshot has been mostly larger budget deficits over
time.

6.
[[link removed]]See
Kogan and Vela 2024 for an explanation and estimation of the U.S.
fiscal gap in 2024.

7.
[[link removed]]The
rate of return assumption matters a lot for how durable revenue
increases from a wealth tax will be over time. A rate of 8.5% is on
the high end of many projections for rates of return to wealth in
coming decades.

8.
[[link removed]]Specifically,
they note about wealth taxes: “Set the rates medium (2%–3%) and
you get revenue for a long time and deconcentration eventually”
(Saez and Zucman 2019b). When they estimate the potential revenue of
Elizabeth Warren’s 2% wealth tax on estates over $50 million (with
an additional tax of 1% on wealth over a billion), they find it raises
roughly 1% of GDP per year (Saez and Zucman 2019a).

9.
[[link removed]]This
estimate comes from the Penn Wharton Budget Model 2022.

10.
[[link removed]]For
a description of that surtax and the competing revenue options debated
at the time, see Bivens and Gould 2009.

11.
[[link removed]]This
number has been inflated to 2024 dollars.

12.
[[link removed]]See
Gardner et al. 2024 on the effective corporate income tax rate before
and after the TCJA.

13.
[[link removed]]For
example, the Distributional Financial Accounts of the Federal Reserve
Board (2025) estimate that the wealthiest 1% of households own over
30% of corporate equities, while the wealthiest 10% own just under
90%.

14.
[[link removed]]See
Sarin and Summers 2019 for how much of the tax gap is driven by poor
reporting requirements on income flows disproportionately earned by
the rich—mostly various forms of noncorporate business income.

15.
[[link removed]]This
range of estimates comes from the Joint Committee on Taxation (JCT)
2023, and Lautz and Hernandez 2024. Part of this variation is about
how much extra revenue is allocated to the strict step-up in basis
termination versus the extra revenue that is collected through the
normal capital gains tax as a result of closing this loophole.

16.
[[link removed]]The
details of this gap can be found in Office of Tax Analysis 2016. The
upshot is that some business owners have managed to deny being active
managers of their firms and have, hence, avoided being taxed on labor
earnings, but they have somehow also managed to deny being passive
owners of their firms, hence avoiding the NIIT as well. It is bizarre
that this not-active but not-passive category of owner has been
allowed to be given legal status, but that does seem to be the state
of the law currently, until Congress acts.

17.
[[link removed]]See
Bivens 2016 on how profits held abroad by deferring taxation were not
a constraint on any meaningful economic activity.

18.
[[link removed]]I
say “appear” because the ability and even the specific strategies
corporations have to make profits clearly earned by sales in the
United States appear on paper to have been earned in tax havens are
all extremely well documented by now, including in Zucman 2015.

19.
[[link removed]]See
Elzayn et al. 2023 for evidence that the audit patterns of the IRS in
the mid-2010s were driven by these considerations.

 
REFERENCES

Batchelder, Lily. 2020_. __Leveling the Playing Field Between
Inherited Income and Income from Work Through an Inheritance Tax_
[[link removed].].
The Hamilton Project, The Brookings Institution, January 28, 2020.

Bivens, Josh. 2016. “Freeing Corporate Profits from Their Fair Share
of Taxes Is Not the Deal America Needs
[[link removed]].”
_Working Economics Blog_ (Economic Policy Institute), September 27,
2016.

Bivens, Josh, and Elise Gould. 2009. _House Health Care Bill Is Right
on the Money: Taxing High Incomes Is Better Than Taxing High Premiums_
[[link removed]]. Economic Policy Institute,
December 2009.

Bivens, Josh, and Lawrence Mishel. 2021. _Identifying the Policy
Levers Generating Wage Suppression and Wage Inequality_
[[link removed]].
Economic Policy Institute, May 2021.

Brun, Lidía, Ignacio González, and Juan Antonio Montecino. 2025.
“Corporate Taxation and Market Power Wealth
[[link removed]].”
Working Paper, Institute for Macroeconomic Policy Analysis (IMPA),
February 12, 2025.

Clausing, Kimberly A., and Natasha Sarin. 2023. _The Coming Fiscal
Cliff: A Blueprint for Tax Reform in 2025_
[[link removed]].
The Hamilton Project, The Brookings Institution, September 2023.

Economic Policy Institute (EPI). 2025. U.S. Tax and Spending Explorer
[[link removed]].

Elazyn, Hadi, Evelyn Smith, Thomas Hertz, Arun Ramesh, Robin Fisher,
Daniel E. Ho, and Jacob Goldin. 2023. “Measuring and Mitigating
Racial Disparities in Tax Audits
[[link removed]].”
Stanford Institute for Economic Policy Research (SIEPR) Working Paper,
January 2023.

Federal Reserve Board. 2025. Distributional Financial Accounts of the
United States
[[link removed]].
Accessed April 2025.

Gardner, Matthew, Michael Ettlinger, Steve Wamhoff, and Spandan
Marasini. 2024. _Corporate Taxes Before and After the Trump Tax Law_
[[link removed]].
Institute on Taxation and Economic Policy (ITEP), May 2, 2024.

Greenwald, Daniel L., Martin Lettau, and Sydney C. Ludvigson. 2025.
“How the Wealth Was Won: Factor Shares as Market Fundamentals
[[link removed]].”
_Journal of Political Economy_ 133, no. 4 (April): 1083–1132.

Hemel, Daniel, and Robert Lord. 2021. “Closing Gaps in the Estate
and Gift Tax Base
[[link removed]].”
Working Paper, Coase-Sandor Working Paper Series in Law and Economics.
University of Chicago Law School, August 13, 2021.

Joint Committee on Taxation (JCT). 2023. _Estimates of Federal Tax
Expenditures for Fiscal Years 2023–2027_
[[link removed]]. JCX-59-23,
December 7, 2023.

Kogan, Bobby, and Jessica Vela. 2024. _What Would It Take to Stabilize
the Debt-to-GDP Ratio?_
[[link removed]]
Center for American Progress, June 5, 2024.

Lautz, Andrew, and Fredrick Hernandez. 2024. _Paying the 2025 Tax
Bill: Step Up in Basis and Securities-Backed Lines of Credit_
[[link removed]].
Bipartisan Policy Center, December 12, 2024.

Office of Tax Analysis. 2016. _Gaps Between the Net Investment Income
Tax Base and the Employment Tax Base_
[[link removed]],
April 14, 2016.

Page, Benjamin I., Larry M. Bartels, and Jason Seawright. 2013.
“Democracy and the Policy Preferences of Wealthy Americans
[[link removed]].”
_Perspectives on Politics_ 11, no. 1 (March): 51–73.

Penn Wharton Budget Model. 2022. _Decomposing the Decline in Estate
Tax Liability Since 2000_
[[link removed].],
University of Pennsylvania, July 28, 2022.

Rau, Eli G., and Susan Stokes. 2024. “Income Inequality and the
Erosion of Democracy in the Twenty-First Century
[[link removed]].” _PNAS
_122, no. 1, December 30, 2024.

Saez, Emmanuel, and Gabriel Zucman. 2019a. “Policy Memo on Wealth
Taxes
[[link removed]],”
September 22, 2019.

Saez, Emmanuel, and Gabriel Zucman. 2019b. _Progressive Wealth
Taxation_ [[link removed]].
Brookings Papers on Economic Activity, Fall 2019.

Sarin, Natasha, and Lawrence H. Summers. 2019. “Shrinking the Tax
Gap: Approaches and Revenue Potential
[[link removed]].” National Bureau of Economic
Research (NBER) Working Paper no. 26475, November 2019.

Tax Policy Center (TPC). 2025. Revenue Estimate of Wealth Tax Proposal
from Why Not Initiative.

Treasury Inspector General for Tax Administration (TIGTA).
2025. _Snapshot Report: IRS Workforce Reductions as of May 2025_
[[link removed]].
Report Number 2025-IE-R027. July 18, 2025.

Williamson, Vanessa S. 2017. _Read My Lips: Why Americans Are Proud to
Pay Taxes_
[[link removed]].
Princeton, N.J.: Princeton Univ. Press, March 2017.

Zucman, Gabriel. 2015. _The Hidden Wealth of Nations: The Scourge of
Tax Havens_ [[link removed]]. Translated by
Teresa Lavender Fagan. Foreword by Thomas Piketty. Univ. of Chicago
Press.

See related work on Wealth [[link removed]] |
Taxes [[link removed]] | Congress
[[link removed]] | Public office, private gain
[[link removed]]

See more work by Josh Bivens [[link removed]]

_Josh Bivens is the chief economist at the Economic Policy Institute
(EPI). His areas of research include macroeconomics, inequality,
social insurance, public investment, and the economics of
globalization._

_Bivens has written extensively for both professional and public
audiences, with his work appearing in peer-reviewed academic journals
(like the Journal of Economic Perspectives) and edited volumes (like
The Handbook of the Political Economy of Financial Crises from Oxford
University Press), as well as in popular print outlets (like USA
Today, the Wall Street Journal and the New York Times)._

_Bivens is the author of Failure by Design: The Story behind
America’s Broken Economy (EPI and Cornell University Press)
and Everybody Wins Except for Most of Us: What Economics Really
Teaches About Globalization (EPI), and is a co-author of The State
of Working America, 12th Edition (EPI and Cornell University Press)._

_Bivens has provided expert insight to a range of institutions and
media, including formally testifying numerous times before committees
of the U.S. Congress._

_Before coming to EPI, he was an assistant professor of economics at
Roosevelt University. He has a Ph.D. in economics from the New School
for Social Research and a bachelor’s degree from the University of
Maryland at College Park._

_The Economic Policy Institute’s vision is an economy that is just
and strong, sustainable, and equitable — where every job is good,
every worker can join a union, and every family and community can
thrive.__About EPI. The Economic Policy Institute (EPI) is a
nonprofit, nonpartisan think tank working for the last 30 years to
counter rising inequality, low wages and weak benefits for working
people, slower economic growth, unacceptable employment conditions,
and a widening racial wage gap. We intentionally center low- and
middle-income working families in economic policy discussions at the
federal, state, and local levels as we fight for a world where every
worker has access to a good job with fair pay, affordable health care,
retirement security, and a union._

_We also know that research on its own is not enough—that’s why we
intentionally pair our research with effective outreach and advocacy
efforts as we fight to make concrete change in everyday people’s
lives._

_The Economic Policy Institute’s vision is for all workers to share
equally in the economic prosperity of our country. Our research
exposes the forces that seek to exclude and diminish the power of
people of color and women—particularly Black, Brown, and indigenous
people—to the benefit of white supremacy and wealthy elites. We
recognize the economic legacy of anti-Blackness; slavery;
colonialization; oppressive policies, practices, and institutions; and
the persistence of structural racism, sexism, and xenophobia today.
Therefore, our vision elevates the importance of racial, gender, and
worker justice as central to the world we want to see. _

_Donate to Economic Policy Institute_
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