An Inequality Tale of Two Capital Cities

President Donald J. Trump visits and speaks with workers, as he is joined by Bernard Arnault, CEO of LVMH Moet Hennessy. Photograph Source: The White House – Public Domain

Nine of the world’s ten wealthiest billionaires now call the United States home. The remaining one? He lives in France. And that one — Bernard Arnault, the 76-year-old who owns just about half the world’s largest maker of luxury goods — is now feeling some heat.

What has Arnault and his fellow French deep pockets beginning to sweat? Lawmakers in France’s National Assembly have just given a green light to the world’s first significant tax on billionaire wealth.

“The tax impunity of billionaires,” the measure’s prime sponsor, the Ecologist Party’s Eva Sas, exulted last month, “is over.”

Sas had good reason for exulting. In the French National Assembly debate over whether to start levying a 2 percent annual tax on wealth over 100 million euros — the equivalent of $108 million — the leader of the chamber’s hands-off-our-rich lawmakers introduced 26 amendments designed to undercut this landmark tax-the-rich initiative. All 26 of these amendments failed.

But France’s 4,000 or so deep pockets worth over 100 million euros — the nation’s richest 0.01 percent — don’t have to open up their checkbooks just quite yet. The French Senate’s right-wing-majority has no intention of backing the National Assembly’s new levy, and, even if the Senate did, France’s highest court would most likely dismiss the measure.

French president Emmanuel Macron, for his part, has spent most of the last decade cutting corporate tax rates and axing taxes on investment assets. And his budget minister has blasted last month’s National Assembly tax-the-rich move as both “confiscatory and ineffective.”

None of this opposition, believes the French economist who inspired the National Assembly’s new tax move, should give us cause to doubt that move’s significance. The annual tax on grand fortune that the Assembly’s lawmakers have passed, says the UC-Berkeley analyst Gabriel Zucman, represents “amazing progress” that has the potential to set a bold new global precedent.

What makes the National Assembly’s tax legislation even more significant? That tax-the-rich vote has come at a time when the most powerful nation on Earth — the United States — is moving in the exact opposite direction. The new Trump administration, with the help of the world’s single richest individual, is now busily hollowing out the tax-the-rich capacity of the Internal Revenue Service.

Donald Trump’s predecessor, Joe Biden, had actually made some serious moves to enhance that IRS capacity, hiring — before he left office — thousands of new tax staffers. But those new hires, notes a ProPublica analysis, have now started going through Elon Musk’s “DOGE” meat-grinder.

Team Trump’s ultimate goal at the tax agency? To use layoffs, attrition, and buyouts to cut the overall IRS workforce “by as much as half,” the Associated Press reports. A reduction in force that severe, charges former IRS commissioner John Koskinen, would render the IRS “dysfunctional.”

The prime target of the ongoing IRS cutbacks: the agency’s Large Business and International office, the IRS division that specializes in auditing America’s highest-income individuals and the companies they run.

On average, researchers have concluded over recent years, every dollar the IRS spends auditing America’s richest ends up returning as much as $12 in new tax revenue. The current gutting of the agency’s most skilled staffers, tax analysts have told ProPublica, “will mean corporations and wealthy individuals face far less scrutiny when they file their tax returns, leading to more risk-taking and less money flowing into the U.S. treasury.”

Moves to “hamstring the IRS,” sums up former IRS commissioner Koskinen, amount to “just a tax cut for tax cheats.”

Donald Trump, agrees the Institute on Taxation and Economic Policy’s Amy Hanauer, “is waging economic war on the vast majority of Americans, pushing to further slash taxes on the wealthiest and corporations, while sapping the public services that keep our communities strong.”

Public services like Social Security. Elon Musk has lately taken to deriding America’s most beloved federal program as a “Ponzi scheme,” and the Social Security Administration’s new leadership team, suitably inspired, has just announced plans to trim some 7,000 jobs from an agency “already at a 50-year staffing low.”

A vicious economic squeeze on America’s seniors. A massive tax-time giveaway for America’s richest. How can we start reversing those sorts of inequality-inducing dynamics? The veteran retirement analyst Teresa Ghilarducci has one fascinating suggestion.

Any individual’s annual earnings over $176,100 will this year, Ghilarducci points out, face not a dime of Social Security tax. A CEO making millions of dollars a year will pay no more in Social Security tax than a civil engineer making a mere $176,100.

If lawmakers removed that arbitrary $176,100 Social Security tax cap and subjected more categories of income — like capital gains — to Social Security tax, Ghilarducci reflects, we could ensure Social Security’s viability for decades to come and even make giant strides to totally ending poverty among all Social Security recipients.

And if we had just merely eliminated the Social Security tax cap on annual earnings in 2023, the most recent stats show, America’s 229 top earners would have paid more into Social Security that year than the 77 percent of American workers who took home under $57,000.

We could also apply Ghilarducci’s zesty tax-the-rich spirit to the broader global economy, as the inspiration behind France’s recent tax-the-rich moves, the economist Gabriel Zucman, has just observed in a piece that cleverly suggests “tariffs for oligarchs.’

The fortunes of our super rich, Zucman reminds us, “depend on access to global markets,” a reality that could leave these rich vulnerable at tax time. Nations subject to Trump’s new tariffs, he goes on to explain, could retaliate by taking an imaginative approach to taxing Corporate America’s super rich.

“In other words,” Zucman notes, “if Tesla wants to sell cars in Canada and Mexico, Elon Musk — Tesla’s primary shareholder — should be required to pay taxes in those jurisdictions.”

Taking that approach “could trigger a virtuous cycle.” The super rich would soon find relocating either their firms or their fortunes to low-tax jurisdictions a pointless endeavor. Any savings they might reap from such moves would get offset by the higher taxes they would owe in nations with major markets.

The current economic “race to the bottom,” Zucman quips, could essentially become “a race to the top” that “neutralizes tax competition, fights inequality, and protects our planet.”

Lawmakers in France have just shown they’re willing to start racing in that top-oriented direction. May their inspiration spread.

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