My intrepid Mercatus Center colleague, Veronique de Rugy, reminds us that wealth taxes are failures. A slice:
When government grows to dominate ever-larger shares of the economy, and when politicians refuse to be responsible about what they spend, there’s a predictable next move: Insist that the problem is “the rich” not paying enough. Never mind that high earners already shoulder a disproportionate share of the tax burden. Never mind that relying on a small and mobile group of people for the bulk of your revenue makes public finances more volatile, not more stable.
No, once spending is treated as untouchable and restraint as politically impossible, it’s only a matter of time before politics demands more, more, more. More taxes and more distortion. This helps explain why wild new forms of wealth taxes are popping up.
California voters are heading toward a November ballot fight over a so-called one-time 5 percent tax on billionaires’ net worth, tied to residency on a date that’s already passed. Illinois lawmakers recently flirted with a tax on unrealized gains—think of stocks yet to be sold at fluctuating prices that only exist on paper—before retreating. And New York City Mayor Zohran Mamdani wants a wealth tax to help close the city’s roughly $12 billion budget gap. Prominent progressive Democrats have explicitly endorsed national wealth taxes (e.g., proposals from Massachusetts Sen. Elizabeth Warren).
Different places, same impulse: Avoid hard fiscal decisions by squeezing a narrow group harder.
A wealth tax is not like the income or consumption taxes we’re used to. In theory, it’s a cut of a person’s entire stock of assets (less their liabilities). In its classic form, a wealth tax is assessed annually. Newer examples in the U.S. appear as onetime levies or use a “mark-to-market” system to tax unrealized gains, treating appreciation as income. However it’s packaged, the economic logic is the same.
Wealth taxes are also a uniquely blunt and damaging instrument. Across advanced economies, they have repeatedly been narrowed or even repealed after delivering disappointing revenue, tax avoidance, capital flight, and costly administrative battles. The international record is decisively negative no matter what convoluted arguments their supporters want to use in America.
A consensus has formed that while artificial intelligence may create new and better jobs, its threat to current job holders requires massive new government training programs, unemployment assistance, income supplement programs and even a guaranteed minimum income. Missing from this rush to expand the government’s social safety net is any recognition that previous efforts to cushion the transition from jobs of the past to jobs of the future have done little to benefit those making the transition—and have raised the cost for society as a whole.
Societal gains from technological change come from what the economist Joseph Schumpeter called “the wave of creative destruction.” The lost jobs and investments rendered unprofitable by new technology free up labor and capital that can be redeployed to produce new and higher-valued goods and services. The more seamlessly the transition from the old to the new, the greater the gain from the new technology. “American exceptionalism,” our ability to generate and sustain higher living standards, has come in part from developing new technology and benefiting from being the first to implement it, and in part from our ability to move labor and capital dislocated by the wave of creative destruction efficiently into higher and better uses.
On average, every month since 2000 some 5.1 million American workers were separated from their jobs or were laid off and more than 5.2 million new jobs were created. In 2025, three times as many Americans changed jobs as did workers in the European Union. So inefficient is the Chinese economy in dealing with creative destruction that most industrial subsidies in China are used to sustain noncompetitive businesses. In short, the U.S. channels the wave of creative destruction through the economic system more efficiently than any other country in the world, and we are constantly enriched by it.
Government programs have provided a cushion to displaced workers, but they have also impeded the transitions. The 1962 Trade Adjustment Assistance program, which provided training, job-search and income support to workers harmed by foreign trade, has provided benefits to more than five million people. Numerous public and private studies have highlighted TAA’s failure by comparing the transition of TAA beneficiaries with workers who lost their jobs during the same period but didn’t receive TAA. Studies by the Government Accountability Office, the Labor Department and the U.S. International Trade Commission agree that TAA is insufficient in supporting dislocated workers to re-enter the labor market. It didn’t improve earnings. Benefits were used mostly as income support, and nonparticipants were re-employed faster than those who participated in TAA.
The resilience of the American worker is one of the most underreported stories of the 2020s. From red tape to import taxes, successive governments have erected barriers to success. Yet America’s workers have persevered and figured out ways to prosper.
A new American Abundance Index illustrates this. The project from Human Progress, an arm of the Cato Institute, reveals the steady rise of the average worker’s purchasing power. The premise of the index is simple: how many hours do you need to work, compared to the month or year before, to be able to afford the “basket of goods,” which is a standard set of household items and services that comprise the Consumer Price Index used to calculate inflation.
The “time price” is how many hours of work it takes to purchase the basket of goods. The “abundance” is how much of the basket one hour of work can buy. The story told by the index is a very good one: since recordkeeping began, “abundance” for average private sector workers comes out to a net increase of 13.8 percent.
First, as complex as the US tariff system in 2026 may seem from a 30,000-foot view—Cato’s tariff complexity flowchart below should give you an idea—it’s even more impenetrable for the companies and, especially, the small businesses that must interpret or navigate the system daily. The ambiguity and obscurity of the system’s rules amplify these costs, especially when applied to complex imports or, as the Express Fasteners case shows, when interpreted in a surprisingly protectionist way by CBP. If a company’s interpretation of these rules doesn’t align with CBP’s version, that compnay can face unexpected—and inflated—tariff liabilities and maybe even penalties for noncompliance.
Republicans spent four years under President Biden opposing a Democratic push to nationalize elections, so naturally President Trump is now calling on the GOP to nationalize elections. Thankfully, Senate Majority Leader John Thune has a memory that begins before 2025 and foresight that extends past 2028.
“The Republicans should say, we want to take over, we should take over the voting in at least—many, 15 places,” the President told a podcast on Monday. “The Republicans ought to nationalize the voting.” Mr. Trump claimed illegal aliens are casting ballots in vast numbers, and that not only was 2020 stolen, but he won Minnesota three times. Minnesota is a reliably blue state that not even Ronald Reagan carried in 1984.
Voter fraud happens, and the price of freedom is vigilance, but the idea that noncitizens are swaying national elections isn’t borne out by the evidence. Georgia Secretary of State Brad Raffensperger ran an audit in 2024 of the state’s 8.2 million registered voters. It found 20 noncitizens, 11 of whom never cast a ballot, plus another 156 people whose status was unclear and who were sent for investigation.
“This is the most comprehensive citizenship check ever conducted in the history of Georgia,” Mr. Raffensperger said. As a reminder, Mr. Biden won the state in 2020 by 11,779 votes, which is a big enough number that if it were phony Mr. Trump’s campaign ought to have been able to find real evidence.
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Mr. Trump’s call to nationalize elections is a mistake for the GOP, since Democrats will be only too eager to try again, on their terms, the nanosecond they regain power. Instead Democrats should thank their lucky stars for America’s decentralized system. They say Mr. Trump is a budding authoritarian, yet the Constitution gives him little power over the 2026 midterms that could be a Republican wipeout.
The phrase “informed patriotism” was a considered one: President Reagan’s call was not for cheap jingoism but for love of country “grounded in thoughtfulness and knowledge” and informed by an “appreciation of its institutions.” This is consistent with his lifelong view of American exceptionalism as something materially different from American superiority; our exceptionalism stems from the righteousness of our cause and integrity of our institutions, not anything inherent in the American soil.
Regrettably, the national pride of Reagan’s era has dimmed considerably. In 2025, the percentage who said they were “extremely” or “very” proud to be Americans dipped to an all-time low in the 25 years that Gallup has been asking this question. A third of Americans told pollsters that seeing the American flag makes them feel bad. The patriotic recession is acute among the young: One in three of those under 35 report they are only a little or not at all proud of their country, and Millennials and Zoomers are far less likely than their elders to believe that America is exceptional among nations.
Nor are Americans particularly well informed. A 2024 survey by the American Council of Trustees and Alumni found majorities of undergraduates ignorant of such basic questions as when the Constitution was written, the substance of the First Amendment, and what’s included in the Gettysburg Address. Last year, a U.S. Chamber of Commerce study found that Americans could only answer about half of a battery of basic civics questions. A 2018 report found that most American adults lacked basic knowledge of American history from the Revolution through World War II.
How did we get here? Much of the fault for today’s waning patriotism can be placed at the feet of the American left. A generation ago, the left generally advocated a “warts and all” approach to teaching American history and inculcating informed patriotism; teaching the treatment of Native Americans, slavery, Jim Crow, nativism, and empire was inherent to teaching the story of America. This narrative spent more time dwelling on America’s blemishes than conservatives would prefer, but it placed those deficiencies in the context of a creedal (though few on the left would say covenantal) nation with great aspirations.
