This 33-year-old economist hasn't just helped shape one of Elizabeth Warren's and Bernie Sanders' boldest policies - he's been changing how you think about wealth, whether you know it or not
- Gabriel Zucman is an economist at UC Berkeley, and the coauthor with Emmanuel Saez of "The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay."
- Zucman and Saez helped craft wealth tax proposals for top Democratic presidential candidates Sens. Elizabeth Warren and Bernie Sanders, with the intention of reducing inequality and funding programs like Medicare for All.
- Zucman's academic career began in 2009, under Thomas Piketty, and his research of the best decade has been foundational to the rising awareness of inequality in America, and the growing call to address it.
- This analysis piece is part of Business Insider's project "The 2010s: Toward a Better Capitalism."
- The Better Capitalism series tracks the ways companies and individuals are rethinking the economy and role of business in society.
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When Senator Elizabeth Warren of Massachusetts brought up taxes at her massive rally this past September in New York's Washington Square Park, a loud faction of her thousands of supporters began chanting, "Two cents, two cents, two cents!"
At Des Moines, Iowa, several weeks later, fans presented her with a giant inflatable of her golden retriever, Bailey, with two pennies on his collar.
The pair of coins is a reference to Warren's signature policy proposal of the past year, a 2% wealth tax - i.e., a tax on assets, such as property and retirement savings - for every dollar of net worth above $50 million. That increases to 6% for everything above $1 billion. Senator Bernie Sanders of Vermont responded with an even larger progressive wealth tax, rising to 8% for a household's net worth over $10 billion. In both cases, the candidates are touting the tax as a way to reduce America's rampant inequality and fund ambitious programs like Medicare for All. Warren expects her policy to raise $3.75 trillion over 10 years, and Sanders expects his to raise $4.35 trillion over the same period.
One of the people behind this idea, which polling has found popular with a majority of Americans, is Gabriel Zucman, a 33-year-old economist at the University of California, Berkeley. In an interview with Business Insider, Zucman said that even Sanders' campaign told him during the senator's 2016 presidential run that the idea of a wealth tax in the United States was too radical. But then the election of Donald Trump and the 2017 Republican tax cuts inspired a mass movement toward what Warren calls "big, structural change."
Zucman told us, "what's happening today is that more and more people are realizing the contradictions that exist in the current system," in regards to the uneven distribution of economic growth. "We are at a turning point now."
And Zucman, whose academic career began in 2009 amid the fallout of the financial crisis, has been one of the key figures of the past decade helping to shape the conversation around recognizing mass inequality in the US and doing something about it.
What studying offshore wealth taught him about politics
Zucman pursued his Ph.D at the Paris School of Economics, where his doctoral adviser was Thomas Piketty, the author of one of the defining economy books of our time, "Capital in the 21st Century." Zucman focused on the ramifications and causes of growing inequality around the world, and eventually discovered that an estimated 8% of global financial household wealth was held in offshore tax havens.
When he approached his research, he said the prevailing idea was that nothing could be done to address this. But when the US passed the Foreign Account Tax Compliance Act in 2010, requiring foreign financial institutions to report on Americans' assets held overseas to the IRS, he saw a ripple effect throughout Europe, as other countries passed similar laws. It taught him that policies can change behavior when it comes to how the wealthy hold their money.
"The point is not that tax evasion has disappeared, that there is no hidden wealth anymore - that's far from true," he said. "But it does strike something that is important, which is that tax evasion, to a large extent, is a policy choice."
Realizing inequality in America was worse than expected
Zucman then headed to California in 2013 for his post-doctoral studies at Berkeley, where he collaborated with a fellow French academic and Piketty associate, Emmanuel Saez, and eventually became an associate professor.
The two studied tax returns and surveys of Americans to infer how much wealth they owned. They produced estimates of wealth distribution dating back to the creation of the federal income tax in 1913, and found a sharp increase in the 1980s, during President Ronald Reagan's era of sharp tax cuts and financial deregulation.
Zucman and Saez discovered that the top 0.1% wealthiest Americans own about 20% of wealth in the US, "which is as much or almost as much as what the bottom 90% owns," Zucman said. Back in 1980, ahead of the shift, the top 0.1% owned about 7% of national wealth.
"And immediately, it became quite well known," Zucman said. The English translation of Piketty's "Capital," a massive treatise on inequality, became an unexpected bestseller in the US, and when paired with his friends' work over in California, inequality was officially a buzzword among politicians and the public, even those who scoffed at Occupy Wall Street and their rallying cry of "We are the 99%" a few years earlier.
Synthesizing into the wealth tax
By 2015, Zucman was sure of two things: tax enforcement was a policy choice, and American wealth inequality was at levels not seen since ahead of the Great Depression and during the Gilded Age of the late 19th century. He began considering what policies, then, could bring the benefits of economic growth to more Americans. He turned to a wealth tax, which he called the most "powerful way to directly tackle the rise of wealth concentration."
Zucman said that what's foundational to his and Saez's work in this area is that the US has actually had a more robust history of progressive taxation than even Europe, despite popular stereotypes used in messaging.
He told us, "One type of reaction I get is, 'Oh, look, you come from France. You are trying to import some kind of French socialist ideas to America.' And that completely misses the point!" In addition to advising the Warren and Sanders campaigns, Zucman and Saez recently published a book, "The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay," for a mass audience.
"What we're trying to do in the book is to help the US public reconnect with America's own tradition of tax progressivity," he said. "France never had a 90% top marginal income tax rate. Just never."
The potential of a turning point for taxes
They've added urgency to their message by showcasing in their book the way that in 2018, for the first time in US history, the bottom 50% of earners in America paid a higher percentage of their income in taxes than the top 400 earners in the country. Zucman and Saez collaborated with Piketty again on the 2018 World Inequality Report, which showed that the top 1% of American adults captured 20.2% of US national income in 2016, and the bottom 50% captured 12.5%. In 1980, the top 1% captured 11% of the national income, and the bottom 50% captured just over 20%.
For Zucman and Saez - and, in turn, Warren and Sanders - the wealth tax is a crucial way of slicing off a chunk of wealth in a way that does not get rid of multibillionaires. Instead, it's meant to restore a healthier form of growth while paying for programs that can help lift working class Americans (about half of the population) like Medicare for All and affordable housing.
A typical criticism of the wealth tax, and significantly higher taxes in general, is that countries around the world have been lowering theirs for years, and we live in an increasingly globalized society. Zucman sees that simply as the effect of the neoliberal world order, of low taxes and free markets, since the '80s, and that there is a recognition that it hasn't been working. And even though the 2017 tax cuts were just a couple years ago, polls throughout this year have consistently found the majority of Americans support a wealth tax.
Zucman said he expects there's "going to be a massive change compared to the last four decades," in regards to both corporate tax rates and wealth taxes. "We are going to see a change in the other direction, instead of a race to the bottom."