As inequality surges, billionaires are under attack. At least some of the blame, or credit, can go to a 32-year-old University of California at Berkeley economist named Gabriel Zucman.
After helping his professor and mentor, Thomas Piketty, crunch centuries of inequality trends, Zucman used his data skills to discover the rich illegally hiding trillions of dollars in offshore tax havens. He then found large corporations legally stashing huge profits overseas. When the Paris-born Zucman moved to the U.S., he teamed up with Berkeley colleague Emmanuel Saez to document the ballooning wealth of the top 0.1%, which they estimated was the highest since 1929.
Now Saez and Zucman have a radical plan to reverse spiraling inequality. Their new book, “The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay,” is a 200-page argument for soaking the rich. At least two of the Democratic frontrunners are listening. Zucman and Saez have advised Elizabeth Warren and Bernie Sanders on their proposals, including their plans for an annual wealth tax.
On Monday, the day before the new book came out, Zucman sat down to explain why inequality requires making billionaires pay up. The interview was edited for clarity and length.
Q: Why write the book now? Are you trying to influence the 2020 debate?
Zucman: It’s broader than that. Many people have become convinced that it’s impossible to tax the rich in a globalized world. That’s not true. The problems of tax competition, tax avoidance, tax evasion are real. But solutions exist.
Q: You find that the U.S. tax system is much less progressive than many assume. What was your conclusion?
Zucman: We find that pretty much all income groups pay roughly 28% of their income in taxes. The working class pays a bit less, around 25%. The upper-middle class pay a bit more, but pretty much all income groups pay close to 28%. The only notable exception is the 400 richest Americans. As a group, they pay 23%, the lowest effective tax rate. We did this computation for each year all the way back to 1913, and find that 2018 is the first and only time that billionaires paid less than all other income groups. That’s a direct consequence of the Trump tax reform, which slashed the corporate income tax rate.
Q: Your conclusions surprised people, including some more established economists, because you measure taxes differently from the way the government does. What’s the difference?
Zucman: What we do is we allocate all tax revenue collected at all levels of government, federal plus state plus local. And we take total U.S. national income, and distribute it across the population. Other estimates are the distribution of federal taxes. State and local taxes are regressive, because they are mostly consumption taxes. They fall more on the poor than on the rich. Also, other data sources never look at what happens within the top 1%. We go all the way up to the top 400 richest Americans.