Yes, We Can—Just Tax The Rich

A growing chorus of liberal commentators has taken to dismissing Democratic proposals for middle-class tax relief as “slopulism”—a portmanteau meant to convey that these proposals are sloppy, unserious, and designed to win votes rather than govern. And this isn’t entirely without merit. Many of these proposals lack the detail and rigor required to truly resolve our structural financial issues. For there are real financial constraints that must be taken into account when deciding spending and taxation. Regardless of one’s views on the importance of the deficit, the United States must service its loans, and the cost of servicing these loans continues to rise. At $734 billion per year debt service is now more expensive than Medicare ($708 billion)—at a time when we need to be discussing how to expand our public healthcare system. Projecting deficit levels out based on current law, the cost of debt service is only going to grow as a proportion of the federal budget, crowding out whatever ambitious social programs we may envision—and this is setting aside the possibility that Donald Trump's economic chaos will drive up interest rates.

Or so we are told.  But the problem with this framing is that it operates from the baseline of a low-tax economy. The baseline of a political economy that has been deeply slanted towards the interests of the already-wealthy.

In reality, the tax “reforms” of the 21^st century—the Bush era tax cuts, the TCJA, and the One Big Beautiful Bill Act (OBBBA)—have both funneled wealth upwards and ballooned the deficit and debt by reducing the tax burden of the richest Americans. These were political choices, made in response to the dominance of the right-wing tax-cut trickle-down  paradigm, and they can be unmade.

This piece is not a detailed legislative package, but a breakdown of just how little we need to raise taxes on the middle class in order to stabilize our financial position. The wealthy have avoided paying their fair share by shifting to forms of income that are not taxed as income because they are derived from wealth. We can fix the deficit and even fund powerful new programs if we are willing to tackle this chicanery.

This mode, which  I will refer to as the Asset-Based Taxation scheme preserves all existing middle class tax cuts: the higher standard deduction, the Child Tax credit, and the tax cuts to those making below $95,000. The money is there. The question is which political choices our society will make.

So let's talk numbers.

I. The low-hanging fruit: repealing the Republican tax giveaways to the wealthy

The federal deficit for fiscal year 2026 is projected at $1.9 trillion. That number is treated in Washington as though it emerged ex nihilo. Just something that policymakers have to deal with. But how much of that deficit is tied to Republican tax bills structured to funnel money to the wealthy? As it turns out, a great deal.

The Tax Cuts and Jobs Act of 2017 of the first Trump administration, now made permanent by the One Big Beautiful Bill Act of 2025 under the second, was the single largest upward redistribution of wealth in modern American history. The 35% to 21% corporate rate cut was projected to reduce revenues by $1.35 trillion over its first decade—the actual revenue loss was even higher than projected, according to the CBO. The Section 199A pass-through deduction, which allows owners of pass-through businesses to deduct 20% of their qualified business income, costs roughly $66 billion per year, with the vast majority of that benefit flowing to the top 5% of the income distribution, per a Brookings analysis. The gutting of the Alternative Minimum Tax, the doubling of the estate tax exemption, and the reduction of the top marginal rate from 39.6% to 37% reduced revenue by even more. 

While the TCJA also contained provisions that did reduce middle- and lower-class tax burdens, most 21^st-century tax relief went to the wealthy. As such, the Asset-Based Taxation Scheme repeals all elements of these bills, other than tax brackets 22% and below and the expanded CTC. The 24% brackets upward return to pre-TCJA levels—28%, 33%, 35%, and 39.6% rates. The Estate Tax and AMT are restored. The pass-through deduction is repealed. And finally, the preferential capital gains rate is equalized.

It’s here that I must point out a potential issue with capital gains equalization—there is literature that suggests investors defer realization at higher capital gains tax rates, which does alter year-over-year revenue projections. But this is mitigated by the elimination of the stepped-up basis at death, which makes long-term deferral far more difficult. And fundamentally, this itself is an unjust privilege—income earners get taxed on their wages, whether they like the current tax rate or not.

The combined annual revenue from these provisions, at conservative estimates, falls in the range of $470 to $565 billion.

Deficit: $1.9 trillion —> $1.4 trillion.

Already, we’ve cut a quarter of the deficit. Just getting rid of the big tax cuts for the rich has taken us this far towards solvency.

II. Closing loopholes that shouldn’t exist

Now we move on to loopholes and moderate systemic repairs.

The American tax code has many, many provisions and loopholes that have no real policy purpose or public interest other than allowing the wealthy and powerful to dodge tax obligations that the rest of society cannot. Aside from the budgetary concern, this is a moral failing that can and should be rectified.

The carried interest loophole. Investment fund managers currently treat their performance compensation—for managing other people’s money, not their own—as capital gains rather than ordinary income, paying a top rate of 23.8% instead of the 37% (or, under our restored rates, 39.6%) that applies to equivalent labor income, despite the fact that the management of an investment fund on someone’s behalf is labor, not capital ownership. While this model does essentially make this loophole moot by equalizing capital and labor taxes, it’s worth doing for the sake of closing the loophole.

Corporate minimum tax and offshore profit shifting. Strengthening the existing 15% corporate book minimum tax, tightening the GILTI (Global Intangible Low-Taxed Income—a law aimed at profit-shifting to lower tax jurisdictions) provisions that govern taxation of overseas income, and cracking down on the corporate inversions and transfer-pricing schemes that allow profitable companies to report their earnings in low-tax jurisdictions would generate an estimated $50 to $80 billion per year. The Biden FY2025 budget scored GILTI reform alone at $374 billion over ten years, and the corporate AMT increase at $137 billion.

The financial transaction tax. A levy of 0.1%—one dime per hundred dollars—on stock, bond, and derivative trades would generate approximately $55 to $78 billion per year, after correcting for behavior changes (which is a known effect in the literature on this type of tax). The CBO estimated that a 0.1% FTT on securities would raise $752 billion over ten years, as confirmed by the CRS. The United States maintained a financial transaction tax from 1914 to 1965.The SEC already imposes a microscopic fee on transactions to fund its own operations. The primary entities affected would be high-frequency trading firms executing thousands of trades per second (which can be said to be a form of distortionary market activity that does not aid in real price discovery), not retail investors rebalancing a 401(k) twice a year. 

Combined annual revenue from implementing these changes would be approximately $105 to $160 billion.

Deficit: $1.4 trillion —> $1.2 trillion

III. Making existing taxation more effective

The provisions in this section are not, unlike those in the previous section, new taxes, but are measures that ensure existing taxes apply to those they are intended to apply to.

Lifting the Social Security payroll tax cap. Currently, earnings above approximately $176,100 are exempt from the 6.2% Social Security payroll tax. This is one of the most distortionary and regressive aspects of our tax system. Nearly everyone pays this tax, but a hedge fund manager or corporate executive earning $80 million pays it on roughly the first two-tenths of one percent of their income, while the waitress earning $80 thousand pays it on one hundred percent. The CBO and JCT estimated that raising the wage base to cover 90% of earnings would generate $662 billion over ten years; full elimination of the cap would generate even more revenue, as the Concord Coalition documents. Eliminating the cap would not only generate approximately $120 to $155 billion per year, it would also shore up the Social Security trust fund, dramatically improving its sustainability. Why, exactly, must the rich essentially be exempt from taxation after the first week of the year? This is not just wrong on a fiscal level, it is wrong on a moral level as well.

Limiting itemized deductions for high earners. The value of an itemized deduction scales with the taxpayer’s marginal rate—a dollar of mortgage interest is worth 37 cents to a top-bracket filer but only 12 cents to a middle-income filer. This is an enormous giveaway to wealthier homeowners with bigger mortgage loans. Capping the value of itemized deductions at 28%, as proposed by the Obama administration, or even lower, would generate $30 to $50 billion per year while leaving middle-income itemizers largely unaffected. The CBO has scored various itemized deduction limits at $500 billion to $2 trillion over ten years depending on the design, according to the CBO.

Partnership basis-shifting crackdown. The Treasury Department has identified a pattern of abusive transactions in which large, complex partnerships manipulate tax rules to inflate deductions by, among other things, depreciating the same asset multiple times. Shutting this down would generate approximately $5 billion per year. This would not be major savings, but it is emphasized because it is fraud by any reasonable definition.

IRS enforcement restoration. There has, for a long time, been a significant gap between taxes owed, and taxes actually collected. Cameron Cummins-Smith, writing recently for Liberal Currents, documents the scale of the problem: the IRS estimates a tax gap of roughly $600 billion in 2022, and the Yale Budget Lab estimates that a 50% workforce decrease at the IRS could result in $400 billion in taxes going uncollected over the next decade. Economists Natasha Sarin and Lawrence Summers have estimated that optimized IRS enforcement could recover up to $1 trillion over ten years, and even the CBO’s more conservative benchmark projects a return of $6.40 for every additional dollar spent on enforcement. The One Big Beautiful Bill Act gutted IRS enforcement funding, making it nearly impossible to realize that gap. Restoring it is not a tax increase—it is ensuring that existing taxes are collected, in accordance with the law. Even a modest improvement in high-income and corporate compliance could recover $30 to $60 billion per year, and a major investment could recover even more.

Stock buyback excise tax increase. The Inflation Reduction Act imposed a 1% excise tax on corporate stock buybacks. While this is a good move, it is not enough. Raising this to 4% would generate approximately $15 to $25 billion per year—the Biden FY2025 budget scored this change at $166 billion over ten years—and create a modest incentive for corporations to direct profits toward wages and investment rather than share price manipulation, which would also improve the job situation for lower and middle income Americans.

Combined annual revenue: approximately $320 to $490 billion.

Deficit: $1.2 trillion —> $700–800 billion.

So just by relatively modest if comprehensive tax reform aimed at eliminating tax breaks and fraud for the wealthy, we are below the 50-year historic average for deficit-GDP ratios.

IV. Medium-difficulty reforms

The provisions here require more political lift but are well-precedented either internationally, domestically, or both.

Progressive inheritance tax. Proposed by Lily Batchelder of NYU School of Law, this replaces the estate tax—paid prior to transfer—with a tax on the receipt of the inheritance as income. Heirs receiving cumulative lifetime inheritances above a $750,000 exemption would include the excess in their taxable income and pay income and payroll taxes on it, plus a surtax. The proposal also applies the legal concept of constructive realization (with the transfer being treated in tax law as a sale, and thus a taxable event) of accrued capital gains on transferred assets, replacing the current stepped-up basis rule (a tax provision that resets the cost basis of an inherited asset to its current market value, essentially erasing all unrealized gains on that asset) that allows a lifetime of gains to escape taxation at death. Together, these changes remove the various levers that the wealthy use to game estate taxes (trust funds/gifts) and trigger taxation upon receipt of the inheritance rather than upon the estate. The Urban-Brookings Tax Policy Center scored Batchelder’s proposal at $340 billion over ten years at a $2.5 million exemption (affecting the top 0.02% of heirs), $917 billion at $1 million (the top 0.08%), and $1.4 trillion at $500,000 (the top 0.18%). Based on the $500,000 exemption (while pointing out that such an exemption is already exceedingly generous to high incomes), this generates approximately $110 billion per year, while affecting only about the top 0.18% of heirs by inheritance size—leaving the vast majority of Americans entirely untouched.

Expanding the Net Investment Income Tax. The NIIT is a 3.8% surtax on investment income above $200,000 (single) or $250,000 (married filing jointly). It currently raises approximately $51 billion per year. Two changes are warranted. First, expanding the base: wealthy owners of S corporations and limited partnerships currently structure their income to avoid both the NIIT and Medicare payroll taxes. The CBO estimates that closing this gap would raise roughly $249 billion over ten years, as confirmed by Treasury analysis. Second, a modest rate increase from 3.8% to 5% would generate additional revenue. Combined: approximately $63 billion per year.

Repealing the 1031 like-kind exchange. Section 1031 of the Internal Revenue Code allows real estate investors to defer capital gains taxes indefinitely by rolling the proceeds of a property sale into another property. Combined with stepped-up basis at death, this creates a pathway for dynastic real estate wealth to escape taxation entirely. The Joint Committee on Taxation has estimated the tax expenditure for like-kind exchanges at $42 billion over five years. Full repeal would generate approximately $5 to $10 billion per year—and, more importantly, it closes one of the last major deferral loopholes for real estate, complementing the constructive realization provisions of the inheritance tax reform.

Combined annual revenue: approximately $153 to $185 billion.

Deficit:$700–800 billion —> $500-$650 billion.

V. Major structural reforms

Everything above is, in a sense, conventional. The provisions either restore prior rates, close acknowledged loopholes, or extend existing tax principles to their logical conclusions. This section is different. We think bigger here. These are structural changes to the way the United States taxes wealth and land—changes that require institutional reform to implement fully, and that represent the transition from deficit reduction to funding an expanded welfare state.

Mark-to-market taxation. Under current law, capital gains are taxed only upon “realization”—that is, when an asset is sold. This creates an enormous and well-documented tax advantage for the wealthy, who accumulate vast unrealized gains on their assets, use them as leverage to fund their consumption (the “buy, borrow, die” strategy—the strategy of borrowing massive sums against their assets to fund their lifestyle without ever triggering a taxable event), and pass the assets to their heirs tax-free (with the value reset to market value via the stepped-up basis loophole) at death. While the inheritance tax reform in the previous section addresses the “die” portion through constructive realization at transfer, mark-to-market taxation addresses the accumulation itself.

Senator Ron Wyden’s Billionaires Income Tax would require households with more than $1 billion in assets or $100 million in income for three consecutive years to mark their publicly traded assets to market annually and pay tax on the gains. For non-tradable assets like real estate and private businesses, a deferral charge at realization, which would effectively be interest on the tax that would have been collected had the asset been tradable, would compensate for the time value of deferred tax, and prevent these assets from becoming a tax shelter. Mark-to-market accounting already exists in the tax code—sections 475, 877A, 1256, and 1296 all employ variants of it. The Wyden proposal merely applies this existing principle to a broader set of assets and taxpayers.

According to the Penn Wharton Budget Model, the Wyden proposal would generate $507 billion over ten years, with a significant front-loaded windfall from the one-time transition tax on existing unrealized gains. The JCT estimated $557 billion over the same window. In steady state, the narrow version targeting only billionaires generates approximately $50 billion per year, whereas a broader version covering the top 0.3% of taxpayers was estimated at $150 to $200 billion per year. The constitutional questions around direct taxation (many would consider such a tax a direct tax, which is prohibited under Article I, Section 9, Clause 4 of the Constitution) are real but not fatal—the precedents cited above demonstrate that mark-to-market is an established feature of federal tax law, and the Sixteenth Amendment provides ample authority to tax income broadly defined, including unrealized gains—and assets used in this way are very much income.

But all of these, while revenue raising and laser-targeted at wealthy taxpayers, do not fully close the deficit. Even mark-to-market does not get us to surplus. We have picked the low-hanging fruit. But I never said it was easy—just that we could close the budget gap by taxing the rich. So we go for broke. How?

A federal land value tax. This is the most economically efficient and least distortionary tax known to economic literature. Economists from Adam Smith to Milton Friedman have recognized that a tax on the unimproved value of land—as opposed to what is built on the land, the things humans actually use—creates no deadweight loss (value that is destroyed via the taxation of productive activity), cannot be passed through to tenants or consumers (there will never be more land), and captures economic value that is created by the community and society around that land.

Total U.S. land value is estimated in the range of $40 to $50 trillion. The Bureau of Economic Analysis estimated the value of all land in the contiguous United States at $23 trillion in 2009; subsequent real estate appreciation has roughly doubled that figure. For the purposes of this exercise, a federal land value tax at a base rate of 3.5%, with an 11.5% surcharge on unimproved property (bringing the total rate on speculative or vacant land to 15%), would generate approximately $1.2 to $1.5 trillion per year after accounting for exemptions on federal land and exemptions (for example, an exemption on the first $250,000 of land value) for owner-occupied primary residences. For a thorough empirical treatment of land rent revenue potential, see Lars Doucet’s “Is Land a Big Deal?”

Now, this one must come with a major caveat. Many constitutional interpretations of this tax deem it as a direct tax, to be apportioned among the states by population, which would create distortions in allocating the tax (for example, Wyoming land would be taxed at a higher rate than New York land). There are ways around this, including merely accepting the deadweight loss from apportionment, or interpreting land rent as imputed income (which has clear backing in the tax code), but it would be the largest structural barrier. 

At the same time, capturing land rents would capture a nearly entirely untaxed pool of wealth (property taxes are minuscule in comparison, and tax productive buildings, penalizing people for developing land). And it is important to remember that land, especially non-residential land, is disproportionately held by the wealthy, and this design exempts nearly all poor, middle-class and even upper-middle-class homeowners.

Combined annual revenue from structural reforms: approximately $1.3 to $1.7 trillion. This closes the gap, and then some. The LVT taxes so effectively that it could be halved and it would still close the gap.

Deficit: eliminated. Surplus of $500 billion to $1.1 trillion.

VI. Conclusion—the money is there

In short, we have modeled a tax restructuring where we have turned a $1.9 trillion deficit into a $1.1 trillion surplus. And every dollar of it was taxed from wealthy individuals. By restructuring our tax system towards greater progressivity, this model generates between $2.3 and $3.3 trillion in annual revenue through five categories of reform:

• Reversing 21^st-century tax cuts that disproportionately benefited the wealthy.
• Closing loopholes that allow avoidance of existing obligations. 
• Ensuring existing taxes are actually collected. 
• Implementing well-precedented reforms with established international and domestic analogs. 
• Undertaking structural reforms to the taxation of wealth and land that the economic literature overwhelmingly supports.

At conservative estimates, this package eliminates the deficit entirely, and then some—more than enough to fund at least one transformative welfare state measure. This is without considering efficiency gains from a universal system, or from removing administrative overhead from means-testing, or from ending corporate subsidies, or from cutting the defense budget. And this is assuming, for example, that we are totally unwilling to raise middle-class taxes at all.

The “slopulism” critique assumes a scarcity of revenue that does not exist. The money is there. Our society under-taxes the rich in manifold ways—land, wealth, capital gains, and high income. Before we talk about how we cannot afford this or that program because of the deficit, or how we must raise taxes on everyone to fund a robust welfare state, we must ask ourselves to what extent “the deficit” is a problem of political economy, and to what extent “deficit hawkery” is an ideological assumption that claims to be pragmatic. While middle-class tax cuts may not be the best vehicle for prosperity and affordability, the idea that economic security must be prepaid by the people who benefit from it is fundamentally incorrect.

Yes we can—just tax the rich.

Featured image is Small Tax Day Tea Party Protest at San Francisco City Hall 89, by Steve Rhodes