Paul Krugman has long been concerned about the effects of wealth inequality on the American economy and democracy. The concentration of enormous fortunes in a very small number of hands matters not simply because of the distribution of income and assets, but because wealth can also confer economic and political power.
In a recent Substack discussion, Krugman returned to these questions with French economist and inequality expert Gabriel Zucman. Their argument is that the scale of wealth accumulated at the very top has become large enough to affect not only taxation and economic inequality, but the functioning of democratic politics.
To understand the scale involved, it helps to put billionaire wealth into a national context. Zucman notes that US household wealth has grown much faster than national income over recent decades. In their conversation he argues that the wealth held by the very richest Americans is now large relative to the economy as a whole. Krugman has subsequently argued that this is one reason wealth taxes deserve serious consideration: the potential tax base is substantial, while the concentration of wealth itself has implications for political power.
Wealth capture
Wealth itself has become much more concentrated, and the rise in inequality at the very top of the distribution has been even more dramatic than the rise in income inequality. The familiar story is the increased share of income flowing to the top 1%; the concentration of wealth among the very richest is more striking still.
As Zucman put it in his conversation with Krugman, the wealth of the richest groups can be usefully compared with national output because it gives a sense both of their economic weight and of the potential revenue available from taxing that wealth. He estimated that the 20 wealthiest people in the United States hold roughly 2–2.2% of total US wealth, equivalent to around 12–13% of annual US GDP.
Political influence and democracy
Attempts by wealthy individuals to influence government are as old as politics itself. In democracies, wealthy people have funded parties and candidates, owned newspapers and other media, supported campaigns and promoted particular political and economic ideas. None of that, by itself, is improper. The concern arises when extreme concentrations of wealth create a correspondingly unequal capacity to shape political debate and outcomes.
That concern is not merely theoretical. An analysis reported in 2026 found that around 300 billionaires and their immediate families contributed about $3bn during the 2024 US federal election cycle — close to one-fifth of total political spending in that cycle. The significance is not only the amount involved, but the ability of very wealthy donors to concentrate large sums on particular candidates, races and political organisations.
Nor is the use of wealth to shape public policy new. Charles and the late David Koch built and funded an extensive network of political organisations, think tanks and educational programmes promoting libertarian and free-market ideas. Their role in funding organisations that challenged or opposed climate policy has been extensively documented, including in US Senate material. It is fair to criticise the political effect of that network; it is safer and more accurate, however, to describe the documented funding and advocacy than to attribute a single concealed motive to every organisation or individual involved.
Social media has added another dimension. Elon Musk bought Twitter in 2022 and subsequently renamed it X. Researchers have found evidence that X’s recommendation systems can affect political exposure and that, after Musk publicly endorsed Donald Trump in 2024, Musk’s own posts and some right-leaning accounts received greater visibility. More recent experimental research has also found that exposure to X’s algorithmic feed can shift users’ political attitudes in a more conservative direction. These findings support legitimate concern about the political effects of platform design, but they do not by themselves prove that Musk personally engineered every algorithmic change in order to suppress opposing opinions. That distinction matters. The research evidence is strong enough to raise democratic questions without overstating what it establishes about intent.
Musk has also openly supported right-wing and far-right political movements and candidates outside the United States. That support is public and can plainly affect political debate. The broader question is whether democratic systems are comfortable with individual private fortunes providing their owners with a scale of political reach that few other citizens could hope to match.
There is another difference from earlier eras: much of this influence is now highly visible. Prominent technology and finance billionaires were conspicuous around Trump’s second inauguration and administration. It would be too sweeping to say that each supported Trump because of any single policy, including tax policy; their motives differ. But Trump’s policies have included substantial tax and regulatory measures of direct relevance to very wealthy individuals and large businesses, and the closeness between political and economic power is therefore a legitimate subject for scrutiny.
Nor is political influence guaranteed to produce electoral popularity. Trump’s approval ratings have fallen significantly during 2026, and Republicans face a difficult mid-term environment. Recent polling has put his net approval deeply underwater. It is therefore by no means certain that the visible support of billionaires will prove an electoral advantage in November. Current polling points to a much more complicated political picture.
Tackling UK wealth inequality
The Treasury is institutionally cautious and highly risk-averse. That is understandable in a finance ministry charged with protecting revenues and market confidence, but caution can also become a barrier to considering reforms that fall outside established practice. The Bank of England — the “Old Lady of Threadneedle Street” — has a different institutional role, and the two should not be confused.
Gary Stevenson, a former City currency trader who now campaigns on wealth inequality, has argued for years that the concentration of wealth is a central problem in the UK economy. His public case is that when wealth accumulates at the top, richer households are able to acquire a growing share of assets, while housing and other essentials become increasingly difficult for ordinary earners to afford. Whether one agrees with every element of his analysis or not, he has succeeded in putting wealth inequality more firmly into public debate.
Zucman brings a different kind of authority to the same broad question. Commissioned by the Brazilian presidency of the G20, he produced a detailed report on taxing ultra-high-net-worth individuals. It estimated that a coordinated minimum tax equivalent to 2% of the wealth of the world’s billionaires could raise roughly $200–250bn a year from about 3,000 taxpayers globally. His argument is not that wealth taxation is administratively effortless, but that practical mechanisms exist and can be developed.
Stevenson has similarly argued that governments need to look seriously at taxation of wealth rather than relying overwhelmingly on taxes on income and consumption. The important point is that this is an area where tax specialists, economists and governments need to work through the design together. Valuation, liquidity, avoidance, migration and international enforcement are real questions; they are reasons to design policy carefully, not necessarily reasons to abandon the subject.
International cooperation matters because wealth can move across borders and can be held through complex legal structures. Zucman has long advocated stronger automatic exchange of financial information and coordinated minimum taxation. The United States already provides an important contrast in one respect: US citizens living abroad are generally subject to US tax on worldwide income, although exclusions, credits and other rules can affect the amount actually payable.
The original instinct behind proposals to tax holding companies or other structures is understandable: policymakers want to prevent people from escaping tax simply by retaining wealth inside companies, trusts or other vehicles. But the tax treatment of such structures differs substantially between jurisdictions and depends on the legal form, residence, source of income and applicable anti-avoidance rules. It is therefore safer not to present a general claim that UK or European holding companies are simply “not taxed on their income”. The stronger case is the broader one: any effective system for taxing extreme wealth has to take account of companies, trusts, offshore ownership and other structures that can separate an individual’s economic wealth from their immediately taxable personal income.
None of this offers a perfect or simple answer to wealth inequality. But the scale of wealth now held at the very top means that governments should at least examine the options seriously. If a workable system can reduce avoidance, raise significant revenue and limit the extent to which economic inequality translates into political inequality, it deserves more than the reflex response that taxing extreme wealth is simply too difficult.
The author is aware of Modern Monitory Theory, and the use of domestic ”Micawber” economic framing is rhetorical, to aid comprehension.
