Report Release: Less Than .2% of Pennsylvanians Hold Over $900 Billion in Wealth
Tackling wealth inequality through the tax code can boost economic opportunity
Harrisburg, PA: A tiny fraction of Pennsylvania families hold a staggering amount of the state’s wealth, according to a new 50-state report by the D.C.-based research organization the Institute on Taxation and Economic Policy (ITEP). The wealth inequality highlighted by the holdings of these extremely wealthy families limits economic opportunities for everyday Pennsylvaniains, and both reflects and exacerbates racial inequality. Tax policy is a critical way that policymakers could start addressing this inequality, but right now federal and state tax codes barely tax extreme wealth at all, and instead often favor sources of income that are derived from wealth.
“Runaway wealth inequality is an enormous problem for Pennsylvania, but the good news is that we have the tools to fight it,” said Marc Stier, Director of the PA Budget and Policy Center “Closing the tax loopholes that have helped build so much of this nation’s extreme wealth is a commonsense way that lawmakers in Harrisburg and D.C. can combat inequality and promote opportunity.”
The report defines extreme wealth as the wealth held by households with net worth over $30 million. This tiny fraction of families holds more than one in four dollars of wealth in the U.S. ITEP estimates that total extreme wealth will reach $568 billion in Pennsylvania and $26 trillion nationally.
Other key findings:
- A nationwide tax of 2 percent on wealth over $30 million could have raised nearly $415 billion if it were in effect this year, including over 9 billion from extremely wealthy Pennsylvanians.
- This tax would affect just 2 out of 1000 or .2% of households in Pennsylvania o Nationally it would affect 0.25 percent of houshoelds.
- Ninety-two percent of extreme wealth is owned by white, non-Hispanic families.
- A large share of Pennsylvania’s extreme wealth – 42%– is held in the form of unrealized capital gains, meaning investment income on which these families have yet to pay tax (and may never pay tax under current law). Nationally, this share is 43 percent.
- A tax on the stock of unrealized gains in 2022 could be expected to raise between $529 billion and $3.9 trillion nationally depending on the tax rate chosen and the percentage of gains deemed to be realized. This includes between $11 and $54 billion from extremely wealthy Pennsylvanians. The report models six different policy options for taxing unrealized gains.
In addition to a wealth tax or a tax on unrealized capital gains as outlined above, the report identifies other ways to strengthen the federal taxation of extremely wealthy people, including:
- taxing increases in wealth annually as an asset grows (mark-to-market taxation)
- taxing increases in wealth before they are passed on to heirs (ending stepped-up basis)
- eliminating the tax preference that makes tax rates on realized capital gains lower than on income from work
- strengthening the estate tax
- creating an inheritance tax
All of these are viable policy options for lawmakers looking to curb wealth inequality.
At the state level, tax codes are already overwhelmingly regressive when it comes to income – and are even more lopsided when it comes to wealth. State lawmakers seeking to fix this imbalance in their tax codes also have several readily available options as identified in the report, such as:
- instituting the PA Fair Share Tax.
- closing the Delaware loopholed to required multinational corporations that pay zero in PA corporate taxes to pay what they ow.
- creating a state wealth tax.
“A very small number of households hold a staggering share of nationwide wealth, and they’ve been able to grow their fortunes in part because our tax system asks very little of them,” said Carl Davis, ITEP’s research director and an author of the report. “New and strengthened taxes on extreme levels of wealth could dramatically reduce the runaway inequality we face today.”
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The Institute on Taxation and Economic Policy (ITEP) is a non-profit, non-partisan tax policy organization that conducts rigorous analyses of tax and economic proposals and provides data-driven recommendations on how to shape equitable and sustainable tax systems. ITEP’s expertise and data uniquely enhance federal, state, and local policy debates by revealing how taxes affect both public revenues and people of various levels of income and wealth.