The overriding fact about the American economy in the past four decades, and even more so in the past four years and the past four quarters, is the massive upward redistribution of wealth and income. Therefore, the opposition to wealth taxes and income tax surcharges on the very rich that’s held by some prominent Democrats—particularly the governors of the two states that are home to the most billionaires—is intellectually and empirically (not to mention politically) indefensible.
California Gov. Gavin Newsom and New York Gov. Kathy Hochul are either oblivious to this massive change to our economy or complicit in it. These are not mutually exclusive alternatives.
The K-shaping of our economy, in which the rich have both steadily and now suddenly amassed a far greater share of the nation’s income and wealth, while the working poor struggle, should be plain for all to see. As to steadily: A paper last year by UC Berkeley economists Emmanuel Saez, Gabriel Zucman, and two of their colleagues documented that between 1982 and 2025, the wealth of the 400 richest Americans rose from 2 percent of the nation’s GDP to 20 percent. As to suddenly: A separate paper by Zucman showed that the wealthiest 19 American households—not 19 percent of American households, just plain 19—increased their wealth by $1 trillion in 2024, as my colleague David Dayen reported in a piece last Friday. Meanwhile, the share of the nation’s wealth held by the bottom 50 percent of American households declined from 3.4 percent to 2.6 percent during the 35 years from 1989 to 2024, according to a report from the Institute for Policy Studies.
Unlike the aforementioned Democratic governors, corporations of all stripes understand the significance of this tectonic economic shift. Retailers certainly haven’t missed it: According to a Moody’s Analytics survey of Federal Reserve data, 30 years ago, the 10 percent of Americans with the highest incomes were responsible for 36 percent of all consumer spending, while the bottom 80 percent was responsible for 48 percent. Today, that high-income 10 percent is responsible for 49 percent of all consumer spending, while the share of consumer spending done by the bottom 80 percent has sunk to just 37 percent. Airlines understand this; they’re reshaping their cabins to provide more room for first-class and business travelers, and reducing the space for coach (which coach travelers might think is both physically and mathematically impossible) as fewer non-rich Americans can afford to fly. Even the discount retailer Dollar Tree understands this, telling the Los Angeles Times that its recent growth is due to shoppers with six-figure incomes coming into their stores for bargains and outspending the company’s original targeted clientele.
Many more examples of this phenomenon, known as “premiumization,” were articulated in a piece from the Prospect’s Emma Janssen last December. The bottom line is that American retailers, as measured by cash registers and Amazon clicks, have moved beyond their concern for Keynes’s aggregate demand. They’ve tailored their strategies to market more to the wealthiest quintile or decile or 5 percent or 1 percent or 0.1 percent. Keynes, bless him, envisioned a shopping public in which everyone’s purchases were significant. Yet the breakup of our common market into one for the rich and one for everybody else is now an axiom for American marketers.
So when a California statewide union of SEIU promotes a wealth tax initiative, when Bernie Sanders and Ro Khanna support a national wealth tax and Elizabeth Warren supports another variant of one, and when Chris Van Hollen supports both the Warren variant and a tax reduction on the working and middle classes, they’re all responding to economic realities that have emerged in recent decades, and are growing even more profound in the last couple of years. So is New York Mayor Zohran Mamdani when he calls for a modest 2 percent tax hike on the wealthiest New Yorkers to fill a giant budget hole left for him by his predecessor.
They all acknowledge that our current tax structure is an abomination, the culmination of the post-1970s abhorrence of taxing the rich, which Ronald Reagan kicked off but which has grown steadily stronger over the past four decades. Under Republican Dwight Eisenhower in the 1950s, the highest income bracket was taxed at 91 percent, and until Reagan became president, at 70 percent. That was one of the chief reasons, along with relatively high rates of unionization, why the nation’s postwar decades stand out as our one period of broadly shared prosperity.
Today, no one is proposing to restore that 91 percent or even 70 percent rate for the highest-income Americans. It might not even work, since so much money is derived not from income but from capital gains and the wealth generated by holding wealth; that explains the recent boomlet in wealth tax proposals. But despite the clear need, even a 2 percent hike to the highest bracket of New York taxpayers is anathema to Kathy Hochul, just as a one-time 5 percent wealth tax to California billionaires is anathema to Gavin Newsom.
Of course, the upward redistribution of wealth and income has led to an upward redistribution of political power. As The New York Times recently documented, fully 19 percent of all donations to campaigns for federal office (president, Senate, and House) in 2024 came from just 300 billionaires. Until and unless we get a Supreme Court that understands how concentrations of wealth result in concentrations of political power (more precisely, one that understands that and does not view it as a good thing), the continuing upward redistribution will extirpate whatever traces of democratic rule still persist. One would think, or at least hope, that the Democratic governors of the states with the highest numbers of billionaires, home to Silicon Valley and Wall Street, respectively, would understand that. And that even if they’ve depended on the kindness of billionaires, they could understand what a destructive habit that has become.
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