The Consumption, Saving, and Borrowing of the Super-Rich: Implications for Taxation

The US faces high inequality and strong revenue needs. Many wish to tax the rich to address these two issues, which has generated a great deal of research into the taxable income of the rich. A key issue though is that much of how the rich got rich does not show up as taxable income. In particular, many of the super-wealthy own stock in startups which then dramatically increases in value, but is never taxed. The rich can borrow against that and not be taxed on that borrowing. But how much do they borrow? And, would taxing their consumption work? We don’t know because we don’t know how much they consume versus save. This project will answer these questions by measuring the consumption, saving, and borrowing of the super-rich – to understand the behavior of the super-rich and what the viable revenue-raising strategies are.