Billionaires and wealth taxes are in the news again. This time, Sen. Bernie Sanders (I-Vt.) and Rep. Ro Khanna (D-Calif.) have unveiled a proposal for a 5% annual wealth tax on the richest Americans.
The Make Billionaires Pay Their Fair Share Act would apply to approximately 938 billionaires in the United States, who are reportedly collectively worth $8.2 trillion.
The bill’s sponsors cite compelling data on wealth inequality as a rationale for the proposal, saying “the CEOs of large corporations are now making 350 times more than their average workers” while noting that more than 60% of Americans are living paycheck to paycheck.
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“At a time of unprecedented income and wealth inequality, this legislation demands that the billionaire class in America finally pay their fair share of taxes so that we can create an economy that works for all of us, not just the 1%.”
Sanders’ statement came in a release regarding the proposal, which economic estimates suggest could raise $4.4 trillion over the next decade.
So, should billionaires like Jeff Bezos of Amazon and Elon Musk of Tesla pay more tax? Read on to learn more.
Bernie Sanders billionaire tax coming soon?
Unlike the current federal tax system, which primarily taxes wages, business income, and capital gains when assets are sold, this proposal would apply directly to the total value of assets (e.g., stock holdings, real estate, private business interests, and other investments).
- According to the bill’s sponsors, the tax would raise an estimated $4.4 trillion over 10 years.
- A portion of that revenue would fund direct payments of up to $3,000 per year to households earning $150,000 or less — effectively creating a recurring benefit for U.S. taxpayers with lower and middle incomes.
“We have a deep economic divide in this country,” Rep. Ro Khanna said in a statement supporting the legislation. Khanna added, “On one side, places like Silicon Valley are generating extreme wealth. On the other side, families are struggling to cover the cost of health care, housing, and basic needs. We can tax billionaires a modest amount to make sure everyone has a fair chance while keeping our innovative engine.”
Supporters argue the proposal is designed to address what they call a structural flaw in the tax code: wealth that grows on paper — particularly stock holdings — can accumulate for years without being taxed unless sold.
- A summary of the bill states that a family of four making $150,000 or less would receive $12,000.
- That money could be used to offset the high cost of housing, health care, prescription drugs, childcare, and other necessities, at an estimated cost of $959 billion.
Beyond direct payments, bill sponsors say that if approved, the wealth tax would fund programs to expand Medicare coverage, invest in affordable housing, support child care, raise teacher pay, and improve home health care for older adults and people with disabilities, all to ease costs for working families.
Those who oppose wealth tax proposals typically argue they amount to punitive taxation that could discourage investment, slow economic growth, and push high-net-worth individuals and their businesses overseas.
Some policymakers warn that taxing unrealized wealth each year presents significant practical and legal challenges. Those might include figuring out how to accurately value privately held assets annually and whether such a levy would even withstand legal scrutiny.
How much tax do billionaires pay now?
Under current law, billionaires typically pay taxes when they realize income. That might be by selling stock and triggering capital gains tax. But because much of their wealth consists of unsold stock that appreciates over time, large fortunes can grow dramatically with limited annual tax liability.
For example, billionaires like Jeff Bezos of Amazon and Elon Musk of Tesla have seen their net worth rise by tens of billions of dollars in some years, largely due to stock gains.
At the corporate level, both Amazon and Tesla have faced scrutiny in past years for paying little to no federal income tax during certain profitable periods.
- For example, according to the Institute on Taxation and Economic Policy (ITEP), Tesla, the company led by Musk, reported roughly $11 billion in U.S. income from 2018 through 2022 but paid little to no federal income tax over that period.
- In 2022 alone, Tesla reportedly earned about $5.5 billion but had an effective federal tax rate near zero after deductions and stock-based compensation credits.
This highlights how corporate tax rules — combined with unrealized gains on stock — allow enormous wealth accumulation for billionaires like Musk.
The proposed wealth tax would operate differently. Instead of waiting for stock to be sold, a 5% levy would apply annually to total net worth above $1 billion.
For a billionaire worth $10 billion, that could mean a $500 million tax bill in a single year, even if they didn’t sell assets.
California billionaire tax: States considering wealth taxes
While a federal wealth tax has yet to pass Congress, some states are moving forward with legislation that would tax high earners.
States including California, New York, Washington, and Minnesota have recently floated wealth taxes, capital gains levies, or surtaxes on the ultra-wealthy to help fund public services.
As Kiplinger has reported, the California 5% wealth tax proposal, backed by the Service Employees International Union–United Healthcare Workers West (SEIU‑UHW) and Congressman Khanna (D-Ca.-17), but opposed by California Gov. Gavin Newsom, would apply, if approved, to individual residents with more than $1 billion in wealth as of January 1, 2026.
While some similar proposals have stalled, others have evolved into narrower taxes on capital gains or high-income earners. But a broader trend is emerging: some policymakers at the state and federal levels are revisiting how extreme wealth is taxed.
Taxing the rich: Bottom line
Whether the Sanders-Khanna proposal becomes law is far from certain. Wealth taxes face steep political hurdles in a divided Congress and almost certain legal challenges if somehow enacted.
But with midterm elections approaching later this year, proposals like this can energize a political base concerned about inequality and draw contrasts on tax priorities.
In any case, the debate over who really pays the most taxes and who isn’t paying their fair share continues. Stay tuned.