According to the Federal Reserve Bank of St. Louis, 30.8% of America’s wealth is currently concentrated amongst the top 1%, and 97.5% is concentrated amongst the top half. By any measure, that is a vastly skewed distribution.
Learn More: If Warren Buffett’s Wealth Was Evenly Distributed Across America, How Much Money Would Every Person Get?
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To curb the gap between the rich and the poor, economists, industry experts and vocal critics of wealth inequality have called for government interventions that may consist of taxes on the wealthiest high-net-worth individuals or tax breaks for the middle class.
But 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 to consider. 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 financial planner and insurance expert at Clearsurance, Melanie Musson, felt the consequences could be much more negative.
Keep reading for a closer look at how a maximum net worth could impact the economy at large.
Quick Take: Pay Cuts for the 1%
If there were a maximum net worth of $1 billion, here is the surplus that would be left over from some big names in the money game:
- Larry Ellison: Ellison currently has a net worth of about $281.7 billion, which would put $280.7 billion back into the financial system.
- Mark Zuckerberg: Zuckerberg has an estimated net worth of $257.6 billion, so $256.6 billion would be up for grabs.
- Jeff Bezos: Bezos could take his $1 billion and still leave $239.7 out of his estimated $240.7 fortune for redistribution.
With just those three individuals having a maximum net worth of $1 billion, which is still a fortune in and of itself, it would allow for almost a trillion dollars of wealth redistribution.
Find Out: 5 Ways You Can Reduce Your Tax Bill Like a Millionaire, According to Robert Kiyosaki
Positive Net Worth Consequences
Could a maximum net worth offer more personal fulfillment and more evenly distribute wealth?
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,” said Razon, “and chances are they might invest a greater portion of their focus towards personal fulfillment, work-life balance and making valuable contributions to society.”
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 benchmarks 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 Net Worth 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.”
Caitlyn Moorhead contributed to the reporting for this article.
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This article originally appeared on GOBankingRates.com: What If There Was a Maximum Net Worth?
