Socialists Think Wealth Is Stolen. They’re Wrong.

America’s socialists don’t like billionaires. This week, Sen. Bernie Sanders (I‑Vermont) posted online, “Billionaires get richer while working families struggle.” New York Mayor Zohran Mamdani (D) campaigned last year on getting rid of them: “I don’t think we should have billionaires.” This spring, Rep. Alexandria Ocasio-Cortez (D‑New York) told a podcaster, “You can’t earn a billion dollars.”

AOC made the socialist stance clear in 2020, a year after joining Congress. “No one ever makes a billion dollars,” she said. “You take a billion dollars.”

But the idea that wealth is taken from others rather than created is an idea economists rebutted 155 years ago.

Early economists, such as James Mill and David Ricardo, theorized that the physical labor exerted to create a good is the real measure of its value. Karl Marx took the concept to its extreme: If labor creates all value, then profit must require unpaid labor, making every employer an expropriator and every fortune a crime.

Then, beginning in 1871, economists countered the labor theory of value. Carl Menger, William Stanley Jevons and Léon Walras demonstrated independently that value resides not in hours of toil but in the judgments of consumers. Writing a 500-page novel takes the same amount of physical labor as typing out 500 pages of the word “banana” repeatedly. Only the novel commands a price. Value is created whenever someone rearranges the world into a shape that others want. It is measured by the buyer, not the worker.

Entrepreneurs are the arrangers. Economist Israel Kirzner argued that entrepreneurship is alertness — noticing an opportunity that nobody else has found. The entrepreneur sees that resources combined in a certain way and priced at a certain level can be recombined into something consumers will value even more. The gap between the two is profit. Nothing is taken from workers, who are paid the wage they agree to, or from customers, who buy the product only when the purchase leaves them better off.

Yet socialists long to punish successful entrepreneurs for their achievements. In November, Californians will vote on a 5 percent wealth tax on all billionaire residents in the state. Researchers at the Hoover Institution estimate that, thanks to billionaires fleeing California, the net present value of the tax will be negative $24.7 billion.

Wealth taxes aren’t a new idea. In 2019, Sanders introduced a tax plan engineered to cut U.S. billionaire fortunes in half within 15 years. Europe already ran this experiment. The Organization for Economic Cooperation and Development found that 12 member countries, all in Europe, taxed net wealth in 1990. Only four did by 2017. According to one estimate from economist Éric Pichet, France’s version of the tax cost roughly twice what it collected and drove out approximately 200 billion euros, or around $228 billion, in capital. French President Emmanuel Macron abolished the tax in 2017.

Socialists, seeing the problem of capital flight, have a solution: a global tax on billionaires. Brazil, in its capacity as president of the Group of 20 in 2024, commissioned a blueprint for a worldwide 2 percent wealth tax on billionaires. The plan would require global cooperation and special tax mechanisms to compensate for holdout countries, so establishing the levy would be difficult.

But if socialists ever succeeded, everyone would suffer. The net worth of most billionaires primarily consists of equity. Taxing those assets every year pushes entrepreneurs to sell down their stakes in their own companies. And these taxes compound: A 2 percent annual tax confiscates one-third of a fortune within 20 years before any of that equity is sold for a profit.

According to economist William Nordhaus, innovators keep 2.2 percent of the surplus they create, and the public keeps the rest. A tax that shrinks an entrepreneur’s share removes their incentive to innovate. That shrinks our 97.8 percent along with it — in the form of companies never founded, cures never developed and wages never raised.

Taxes also change behavior. Confronted with a levy on wealth, innovators won’t simply write a check and return to developing their start-ups. They will hire estate lawyers. They will move their fortune into trusts and foundations. And they will learn that the surest way to keep what they have built is to stop building — a wealth tax punishes unrealized, illiquid, risk-laden assets most. The global tax would redirect some of the nation’s most productive minds from the hard work of innovation to the sterile work of wealth preservation.

A movement that believes wealth is stolen will tax it, cap it and make everyone poorer. Ideas drive growth, and ideas come from people who can profit from them. A world that cherishes entrepreneurs will enjoy advanced chips and revolutionary cures. A world that punishes its innovators will at least enjoy plenty of slogans.