On March 7, President Joe Biden reintroduced proposals to increase taxes on the wealthiest Americans and the nation’s most profitable corporations. The move virtually ensures that the nation’s extreme wealth inequality — more than one in four dollars in the country is held by a tiny sliver of households with a net worth over $30 million — will be part of the national election debate. But excessive wealth may take center stage in at least 10 states, ranging from Democratic bastions such as California, Hawaii and New York to swing states such as Nevada and Pennsylvania.

Wealth taxes have popular support, with about 61% of Americans surveyed by Pew in 2021 saying they favor raising tax rates for households that make more than $400,000. The results reflect the widespread sentiment that “some corporations and wealthy people do not pay their fair share in taxes,” per the survey’s authors. 

The wealthiest 0.01% of Americans pay a lower share of taxes than most working families, according to an analysis by the Center on Budget and Policy Priorities in 2021. While the average American taxpayer paid an average federal individual tax rate of 13% in 2021, the wealthiest 400 billionaire families in the country paid just 8.2% (and the 25 richest Americans paid a tax rate of just 3.4% on $401 billion of income between 2014 and 2018).

Then there’s the regressive nature of state and local tax systems — meaning that the tax burden falls harder on poor residents than on wealthy ones. In 41 states, high-income residents are taxed at lower rates than the rest of taxpayers, according to a January report from the Institute on Taxation and Economic Policy, a nonprofit nonpartisan tax policy organization.” In the 10 states with the most regressive systems — Florida, Washington, Tennessee, Pennsylvania, Nevada, South Dakota, Texas, Illinois, Arkansas and Louisiana — the lowest-income 20%  pay three times as much of their income in taxes as the wealthiest 1%. Eight of those states rely heavily on sales and excise taxes, which have an outsize effect on the poor who spend a greater share of their income than wealthy households do, say tax experts. 

“State tax systems are upside down,” said Samantha Waxman, deputy director of state policy research at the Center on Budget and Policy Priorities, a nonprofit research and policy institute. ”They’re asking more from those earning the least and asking less from those that are earning the most. It’s incredibly unfair.”

For many years, the state with the most regressive tax system in the country was Washington, which tends to vote Democratic in its politics and progressive in many of its policies. In 2022, the state introduced a 7% tax on capital gains, and the effect was bigger than expected, though it affected only about 4,000 residents. The tax raised almost $900 million in revenue, far exceeding initial estimates of $250 million, to fund early childhood education, child care, school construction and community colleges. 

“We’ve been seeing greater concentration of wealth at the top, and this tax is an important step in bringing wealthy folks to the table to do their part, just like the rest of us have been doing,” said Treasure Mackley, executive director of Invest in Washington Now, which advocates for progressive revenue solutions for the state.

The tax has become a political football. Hedge fund executive Brian Heywood reportedly spent more than $7 million to gather enough signatures to put petitions on the ballot to repeal the tax. Opponents from lawmakers to lawyers argue that the tax is driving billionaires such as Amazon founder Jeff Bezos to move to Florida, which doesn’t tax capital gains. When Bezos recently unloaded $4 billion of Amazon stock, it was reported that he was able to save $288 million in taxes in Washington state, twice the amount he just spent on two homes in his new Florida neighborhood of Indian Creek Village, located on a barrier island nicknamed the “Billionaire Bunker.”

When business leaders move out of state, “you push that economic activity with it — and you push the charitable giving out of state,” said Lewis M. Horowitz, taxation team chair at Lane Powell law firm, who added that he has helped several Washington multimillionaires and billionaires move out of state.

Those examples are anomalies, Mackley and Waxman said. Waxman pointed to research showing that jobs and weather are much bigger factors in people’s decisions to move from state to state.

In some states, both conservative and liberal wealthy campaign donors are using their money to push through their favored policies, sometimes upending the will of the people. In Arizona in 2020, voters passed a ballot initiative that substantially increased the top tax rate for those earning over $500,000 in income, with the revenue dedicated to education. But the state Legislature, dominated by Republicans — some funded by wealthy Arizonans —  “torpedoed it and actually lowered taxes on the wealthy, and now they’re having trouble funding basic programs in the state,” said Bob Lord, a tax lawyer and associate fellow at the Institute for Policy Studies, a progressive think tank. When the initiative’s original supporters sought to push it again, they were stymied by a change in the law that made it more difficult to get signatures to place such an initiative back on the ballot. 

Extreme wealth not only brings enormous benefits to those who have it, it also has consequences that ripple throughout the economy. The wealthy pay a lower tax rate at the state and federal level, costing hundreds of billions of dollars that could go toward funding public services such as education, health care, affordable housing and child care. Higher tax revenues could free the government to provide tax relief to the poor in the form of child tax credits. A federal child tax credit cut child poverty by more than 40% in 2021 before it expired due to Congressional inaction.

A nationwide tax of 2% on wealth over $30 million could have raised nearly $415 billion if it were in effect in 2022, according to the Institute on Taxation and Economic Policy.

An inequitable tax system “constrains what we have to invest as a country,” said Jean Ross, senior fellow of economic policy at the Center for American Progress, an independent nonpartisan policy institute. “We have so many challenges — stabilizing Medicare and Social Security, dealing with climate change, child care, aging Boomers — and how do we make sure that we have well-educated skilled workers and the infrastructure to support a growing and thriving economy that works well for all of us?”