According to the Federal Reserve Bank of St. Louis, 30.8% of America’s wealth is currently concentrated amongst the top 1%; 97.5% amongst the top half. By any measure, that is a vastly skewed distribution.
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In order to curb the gap between the rich and the poor, vocal critics of wealth inequality have called for government interventions that may consist of taxes on the wealthiest Americans or tax breaks for the middle class.
What would the world look like — just go with it — if a maximum net worth were instituted? While the question is purely hypothetical, it proves an interesting one on which to speculate. What happens in a reality where taxes are imposed to keep net worths under, say, $1 billion?
GOBankingRates spoke with financial experts to hear their opinions on the economic and personal impact of such a reality. Aaron, Razon, personal finance expert at Couponsnake, felt the consequences could be positive, while finance and insurance expert at Clearsurance Melanie Musson felt the consequences could be much more negative.
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Positive Consequences
Could a maximum net worth offer more personal fulfillment and more evenly distribute wealth?
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Increased Economic Mobility
According to Razon, the most obvious change resulting from the implementation of a maximum net worth would be greater economic mobility as a result of the narrowing of the gap between the very rich and the very poor. Or the very rich and… most other people.
With wealth more evenly distributed, “economic mobility for low-income earners would become more attainable,” Razon said.
Low-income earners often suffer from lack of access to resources available to their wealthier counterparts. High costs of education, healthcare and housing perpetuate a vicious cycle of poverty and economic stagnation.
If, however, a maximum net worth existed, prices would have to come down across the board. Corporations wouldn’t be able to cater to those at the top in the same way, because the top would have a ceiling — and more people may be capable of reaching it.
Increased Personal Fulfillment
If the possibility of amassing unlimited wealth was taken away, so, too, might America’s “more, more, more” mentality, argued Razon, who stated this shift could encourage individuals to live more fully in the moment and be grateful for what they have as opposed to what they haven’t yet acquired.
Finally, the goal post would stop moving.
“People would have no choice [other] than to redefine what success and achievement means to them, and chances are they might invest a greater portion of their focus towards personal fulfillment, work-life balance and making valuable contributions to society,” Razon said.
While it would still take a great deal of cut-throat focus and fortitude to individually amass $1 billion dollars, the takeaway is that the overall cultural mindset could shift, making that financial ladder climb less desirable or personally significant.
Increased Motivation
It becomes increasingly difficult and demoralizing to run a marathon without ever knowing what mile you’re on. The journey can begin to feel insurmountable, exhausting and not worth it anymore.
But, Razon said, “The presence of a financial finish line changes everything.”
Charting financial bench marks becomes a lot easier when you know where they are — especially when they’re closer. With a financial ceiling imposed, Americans could paradoxically see an increase in motivation and momentum by viewing their financial and professional dreams as much more attainable.
Negative Consequences
On the other hand, the inability to keep growing wealth indefinitely could lead to stagnation.
Increased Hiding of Assets
Musson had a less positive — yet no less potentially accurate — outlook on what might result if a maximum net worth were imposed.
“Some people [would] continue to accrue wealth regardless. There are always loopholes,” said Musson, who highlighted Americans’ obsession with money and greed.
According to Musson, many individuals would never actually adhere to a government ceiling; they’d just figure out better ways to hide assets. Some could use overseas banks; others could form businesses or shell companies to transfer wealth away from themselves as individuals.
And with so much money off the books, things would only get worse. Economic mobility and access to resources for low-income earners would remain difficult — as would the ability to fully understand or track why.
Decreased Productivity and Innovation
Musson disagreed with Razon that a maximum net worth would increase motivation.
“Some people would stop being productive,” she said. “Without the incentive of more wealth, some people would stop trying.”
Musson explained that not only do wealthy individuals employ thousands of people, they also help fund all kinds of innovation and ventures that spur the economy. Unfortunately, without the same financial incentive, the desire to innovate and grow could diminish — and, therefore, so could advancements in sectors like technology and medicine.
Musson felt certain of one thing above all else: “The thing that would not happen is that anyone would grow their wealth beyond the limit and be OK with giving the surplus to the government. […] They’d either find a way to keep it or they’d minimize their wealth.”
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Sources
Federal Reserve Bank of St. Louis, “Share of Net Worth Held by the Top 1% (99th to 100th Wealth Percentiles).”
Aaron Razon, Couponsnake
Melanie Musson, Clearsurance
This article originally appeared on GOBankingRates.com: What If There Was a Maximum Net Worth?
