Just Taxing the Rich Won’t Save Our Social Safety Net

To create an America where everyone can flourish, we’ll all need to pitch in.

Protester displays “Tax The Rich” sign. (Credit: keegstra)

Like many anti-Trump Americans, I’ve been closely watching Bernie Sanders’ and Alexandria Ocasio-Cortez’s Fighting Oligarchy tour, for which these politicians have traveled to cities from Los Angeles to Boise with the sole purpose of resisting the Trump administration. In front of crowds of tens of thousands, their speeches lambast Elon Musk’s DOGE for firing federal workers and threatening to gut Medicaid and Social Security. They call upon their listeners not only to defend existing social programs, but also to support politicians that will establish Medicare for All, expand housing programs, and fund renewable energies – policies that our country desperately needs.

Their plan to pay for these proposals matches the overall Democratic narrative: “tax the rich.” As a voter, it’s tempting to believe that simply taxing elites could solve our social and fiscal problems. Democrats like Bernie, AOC, and others are right to call out unacceptably high wealth inequality and tax evasion among the rich. There’s just one problem: taxing the rich alone won’t cover the expansion of social services, let alone fund the services our federal government already provides.

Before getting into taxation, let’s talk about just how horrendous the United States’ current finances are. In 2024, the federal government took in $4.9 trillion in tax revenue, but spent a whopping $6.8 trillion. That means that for every dollar you paid in taxes, the federal government spent $1.39 – mind you, in a year without a pandemic, recession, or war. The national debt has grown so large that we now spend more on interest payments than the entirety of Medicare. If the federal government were a household, this is a bit like parents maxing out their credit cards and hoping the kids will eventually pay off the balance.

Politicians like Bernie and AOC would argue that the debt and deficit are secondary to abating poverty and inequality now. Perhaps so, but it’s undeniable that the consequences of deficit spending are fast approaching. The Social Security and Medicare trust funds are projected to run out of assets by 2033 and 2036, meaning that the elderly and disabled would receive smaller payments and millions would be thrown into poverty. This makes Bernie’s proposed Medicare for All, which would cost an additional $24 to $36 trillion over a ten year period, virtually impossible under current circumstances.

Why won’t taxing the rich solve these deficits and allow the expansion of social programs? Consider the “wealth tax,” a proposal by Elizabeth Warren to tax ultra-wealthy households as a percentage of their assets’ value, even before those assets are sold. To understand its limitations, let’s take an extreme scenario. Suppose the federal government were to seize all assets of the 801 US billionaires – every stock, mansion, watch, and car. It would only raise enough money to cover a mere 3 1⁄2 years of current deficit spending, one time (of course, on top of crashing the US stock market).

That’s the fundamental shortfall of wealth taxes. Even if such a tax could be implemented without loopholes or evasion, wealth is finite at any given moment. While the wealth held by Americans and the interest it accrues are both enormous, taxing that wealth will never yield enough to cover current deficits, let alone fund more spending.

So why not simply tax the income of high earners more? Unfortunately, that won’t be enough to reach our goals, either. Let’s take another extreme scenario: what if the federal government taxed all income above $500,000 at a 100% rate (assuming that this income doesn’t dry up)? It would raise a significant $1.5 trillion per year above current taxation levels – but this wouldn’t even cover our current deficit of $1.8 trillion annually. Neither would raising taxes on corporations. If we went back to the pre-Trump corporate tax rate of 35%, it would bring in just $130 billion a year in additional revenues.

To be crystal clear, I do believe that our nation’s rich need to pay more in taxes. We need to reform the Social Security tax system, eliminating the cap on taxable income at $176,000. We need to remove loopholes and crack down on tax evasion among the top 1%, who alone evade an estimated $163 billion per year. We need to undo Trump’s 2017 tax cuts, most of which went to stock buybacks that benefitted wealthy shareholders. These reforms are necessary, but not sufficient, if we hope to protect and expand our nation’s social services.

At the end of the day, America needs its welfare network. Social Security alone lifts 1.4 million children and 16.5 million elderly out of poverty. Medicare and Medicaid represent a last line of defense against exorbitant medical costs, providing at-risk Americans with increased access to care and economic security. Recipients of housing vouchers see improved health, economic mobility, and access to educational opportunities, while SNAP food assistance further reduces poverty and provides access to nutritious meals. As a nation, we need to make it a priority to defend and build upon the social services we provide.

What, then, should we do in order to prevent shortfalls in (and even expand) programs like Social Security and Medicare? As Bernie Sanders himself says, we must look across the Atlantic to nations like France, Denmark, and Norway with superior welfare networks. As tax expert Jessica Riedl explains, Scandinavian and other European countries have top income and corporate tax rates at similar or even lower levels than the US. Where they outpace the US in tax revenue is in middle-rung income brackets and value-added taxes (in effect, very similar to sales taxes), both of which, when done well, fall disproportionately on the middle class.

Progressive Democrats are right to fight vigorously against Trump’s proposed cuts to social services, and they’re right to call for expanding federal programs even further. But it’s time for the rhetoric on taxation to change. If we want to build a better America, where every family is secure in having healthcare, housing, and sustenance, we can’t just scapegoat the rich. We need to emphasize the role all of us, including the middle class, will play in making true American equality and opportunity a reality.