DSA Delusions #4: Can "Tax the Rich" Pay for Everything?

Ask a democratic socialist how to pay for free college, healthcare at no cost, and a publicly owned housing system, and the answer usually arrives in three words: tax the rich.

It is a good slogan. In fact, few political slogans are as appealing in their simplicity. The government needs money. Some people have enormous fortunes. Tax those fortunes and use the proceeds to provide healthcare, housing, education, retirement, transportation, and other public benefits. It is short, it sounds fair, and it points at people most of us will never meet. The Democratic Socialists of America program gives only one sentence explaining how it plans to pay for their plan: it proposes to "enact aggressive wealth taxes on the richest individuals and corporations to spend on public goods and infrastructure."

Evidentiary economics demands questions, answers, and evidence. How much would it raise? Who would really pay it? What happened in the places that tried it? This installment of DSA Delusions follows the numbers wherever they lead. The first three pieces in the series looked at “what is their platform,” what "free" really means, and who gets to decide what things are worth. This one asks whether it could work to ‘just send the bill to the rich’.

What Will It Cost?

Since the DSA doesn’t attach numbers to its proposals, it’s difficult to calculate the required tax revenue, so we're forced to estimate. Some economists estimate the cost of the DSA’s delusions at an additional $7 to $20 trillion a year. My own estimates are somewhat higher, but even the lowest estimates mean increasing government spending to twice its current level. That means we need to discover a revenue source twice as large, and a wealth tax doesn’t come close.

Suppose we take it to the limit and confiscate the entire wealth of the Forbes richest 400: between $6 and $7 trillion. OK, that still isn't enough to pay for one year of new programs, and you can only do that once because now it’s gone.

What is a Wealth Tax?

The wealth-tax line in the DSA program is its only explicit revenue proposal. The line gives no rate, no definition of who counts as "richest," and no estimate of what it would raise. The sections on healthcare, housing, education, and the shorter work week describe what people will receive. None says what it costs or who covers the difference. And it’s crucial to make clear that these are not small, temporary expenditures. They represent continuing commitments.

Wealth Is Not Like Income

This is confusing because people struggle to distinguish between a stock and a flow. A stock is like a water tank; a flow is like the pipe filling the tank and the pipe on the other side draining it. Income tax is a tax on the amount flowing in, a consumption tax is a tax on the amount flowing out, and a wealth tax is a tax on the amount in the tank. At reasonable levels, taxing the flows going in or out is sustainable, but taxing the amount in the tank is unsustainable without some way to increase the inflow to compensate.

At what rate is new taxable wealth, the inflow, being created relative to the rate at which existing wealth, the water in the tank, is being taxed and spent? A one-time expenditure can be financed by drawing down a stock, taking water from the tank. A permanent government program cannot sustainably be financed that way unless the stock is continually replenished or another continuing revenue stream replaces it. Healthcare expenses recur next year. Teachers must be paid next year. Housing must be maintained next year. Retirement benefits come due next year. Transit systems must operate next year. And the year after that.

That turns “tax the rich” from a statement about how much wealth exists into a question about how the economic system continually creates taxable income and wealth. The evidence overwhelmingly answers it: free-market capitalism, the only proven engine of economic growth.

Let’s look at an easy-to-imagine example: a large family farm. Suppose this farm has 2,000 acres valued at $6,000 per acre. The land alone is worth $12 million. Add its buildings, machinery, and other assets, and we'll assume the entire operation is worth about $20 million. That would comfortably place the family among America's wealthiest 1% by net worth.

Now suppose the farm, after paying its workers and all its other expenses, produces $200,000 in annual profit for the family. That profit is income. The $20 million farm is wealth. The distinction is critical.

Based on Federal Reserve distributional wealth data, the top 1% held roughly $60 trillion in net wealth in mid-2026. A hypothetical 5% tax on every dollar of that wealth would therefore produce roughly $3 trillion on paper in the first year, before exemptions, valuation problems, avoidance, behavioral changes, or collection costs.

DSA does not specify a wealth-tax rate, so 5% is not DSA's proposal. However, it is the most conservative estimate of a rate that could extract revenue on anything approaching the scale required to pay for their program.

For our $20 million family farm, a 5% annual wealth tax would produce a $1 million first-year bill, five times our hypothetical family's $200,000 annual profit.

Where does the million dollars come from?

The family could borrow, sell other assets, reduce investment in the farm, or sell productive acreage or equipment. But none of these solve a recurring cash-flow problem indefinitely. When the tax appears again next year, the family will need cash again, and selling productive assets will likely reduce the farm's ability to generate the income needed to pay future taxes.

That's the issue a static revenue calculation misses. Multiplying today's wealth by a tax rate tells us what exists on paper before the tax changes anything. It doesn't tell us what happens to the tax base afterward.

Wealth Is Not Cash

This problem isn’t unique to farms and small businesses. Elon Musk, the world's wealthiest person, has repeatedly explained that his enormous net worth doesn't mean he has an equivalent amount of cash. During a 2019 federal defamation trial, Musk testified, “Some people think I have a lot of cash. I actually don't.” Forbes estimated at the time that as much as 99% of his wealth was held in shares of Tesla and SpaceX. In February 2026, Musk made the distinction even more explicitly, saying that his net worth was “almost entirely” the result of his ownership stakes in Tesla and SpaceX and that less than 0.1% was cash.

That's the difference between wealth and liquidity. A billionaire may own billions of dollars' worth of productive assets without having billions of dollars in cash to pay a recurring wealth tax. Obtaining that cash can require income, distributions, borrowing against the assets, or selling some of the ownership interest.

Just like the family farm, applying a wealth tax to Musk’s holdings would mean selling them off over time to pay the tax. Over time, everyone who owns the stock would have to keep selling until the company is so broken up that no one is in the top 1%. Some might say, “that’s a good thing.” But then who is left to pay the taxes to fund the programs? The tax base has been taxed out of existence. This idea applies to any large enterprise.

A large enterprise means concentrated wealth; taxing that wealth destroys the enterprise, and once the enterprise is gone, you lose the ability to tax it. That means that the healthcare, housing, education, retirement, transportation, and other public benefits that the DSA promised are no longer funded. The country now has the worst of all possible worlds; everyone has come to rely on a mechanism that no longer exists, and the means to replace it has been destroyed. What happens next?

If government eventually becomes the owner, the system has moved from taxing private capital toward the public-ownership model DSA separately advocates. It paradoxically proposes both aggressive taxation of corporations and public ownership of the largest corporations and essential industries. But once government owns a corporation, that business is no longer part of the same private corporate tax base. The relationship has fundamentally changed. The government becomes both owner and tax collector. Can it generate funds by paying taxes to itself?

When You Tax It You Change It

It’s delusional to assume today's tax base remains unchanged after implementing policies specifically designed to change it. We’ve already seen how California's proposed wealth tax caused folks who might be affected to move out of state. And tax avoidance doesn't require moving to Monaco. Economic response doesn't require physically leaving the country. A Congressional Research Service report on tax havens describes evidence of significant corporate profit shifting, although estimates of the resulting revenue losses vary. Multinational corporations can shift profits through mechanisms such as related-party transactions and allocating debt across jurisdictions.

The Penn Wharton model's baseline assumes that each added percentage point of wealth tax rate cuts taxable wealth by 13 percent, through avoidance, evasion, and moving assets. Applied to a 2 percent rate, that is roughly a quarter of the tax base gone before collection (that last step is simple arithmetic, not the model's own output). Even the version with added IRS enforcement still assumes a reduction of 8.4 to 9.4 percent per point. That is a scorekeeper's own assumption about how people behave at these rates, not a critic's guess. When the government changes the rules of the game, the players, the people, respond to the new rules by changing the way they play. It’s human nature.

What Happened When It Was Tried?

The idea is not new, and the record is not encouraging. The OECD reports that 12 member countries had net wealth taxes in 1990 and only four still did in 2017. It says decisions to repeal "have often been justified by efficiency and administrative concerns," that the taxes have "frequently failed to meet their redistributive goals," and that revenues, "with a few exceptions," were very low. By 2025, Euronews, citing the Tax Foundation, counts three countries that tax individuals' net wealth: Spain, Norway and Switzerland. Its 2023 yield figures, which it attributes to the OECD, run from 0.6 percent of total tax revenue in Spain to 4.3 percent in Switzerland.

Norway is the most recent test, and its evidence cuts both ways. Norway raised its wealth and dividend taxes from 2021. Tax agency figures, reported by The Local, show an average of 44 super-rich residents (net assets above 100 million kroner) leaving in each of 2022 and 2023, while three moved in. The 47 who left in 2022 held 44 billion kroner between them. Reuters reports that revenue now sits at 0.6% of GDP—a drop in the bucket.

Both things appear to be true. A country can keep collecting from a wealth tax even as some of its wealthiest residents leave. But look at the size of the result. For scale, the U.S. federal government spends 23.1 percent of GDP today, according to CBO. A yield of 0.6 percent of GDP would fund about 3 percent of that. Even a wealth tax that survives and keeps growing is a modest line item, not a financing plan for a second federal budget.

The Numbers Don’t Add Up

The DSA program makes a delusional claim: that taxing the richest can finance a vast expansion of what government provides. The evidence presented above does not support that claim. Furthermore, the claim ignores the reality that in a free-market economy, a large fortune is mostly the accumulated result of customers choosing, one purchase at a time, to pay for what a business offered. Profit signals that people valued a product above what it cost to make. In today’s world, unlike in the past, most wealthy people got that way by finding successful ways to give lots of people things they value and are willing to pay for. Many tried and failed, and some succeeded. That’s one important reason government fails at running the economy: it doesn’t allow for inevitable failures.

Taxing the Tax Base

What happens to a tax base when you overtax it? You eventually eliminate it. Every sustainable government requires a continuing source of resources from the economy it governs. A dynamic analysis therefore has to follow the whole loop: Investment creates productive assets->productive assets generate income and profits -> income and profits increase asset values and produce taxable wealth->government taxes some portion of that economic activity->those revenues finance public services. Change one component and the effects propagate through the others.

"Tax the rich" is a reply to "who pays?" that holds up until someone checks the arithmetic. The questions to put to every plank are the same: who pays, how much, and who decided it was worth it? You cannot design a workable expenditure system independently of the system that generates the revenue.

DSA's vision requires enormous continuing flows of public resources while simultaneously proposing policies intended to transform the ownership and accumulation of private capital from which a substantial part of those resources is supposed to come.

“Tax the rich” answers the politically easy question: Who should pay today? A workable economic system must answer the much harder one: Who pays tomorrow? And tomorrow, unlike a campaign slogan, arrives every year.