When President Obama addresses the nation in the State of the Union address on Tuesday, he is likely to boast about the health of the economy, which last year created jobs at its fastest clip since 1999. But the president isn't about to let the economy go on cruise control. Obama is also expected to announce a series of proposals aimed at reducing inequality, which has emerged as a major economic concern among American liberals.
The proposal likely to attract the most attention is Obama's plan to raise the capital-gains tax for Americans earning $500,000 or more from 23.8 to 28 percent. In addition, the president wants to close a loophole allowing Americans to dodge paying taxes on inherited money. These two proposals—alongside a separate plan to tax companies with assets over $50 billion—are expected to raise $320 billion in revenue of the next decade.
Capital gains tax reform has been a Democratic Party goal for years. But its inclusion at the center of Obama's economic agenda signals renewed attention on wealth, rather than income, inequality. And for that, the American president owes a tip of the cap to a person who isn't even American: the French economist Thomas Piketty.
In his 2014 book Capital in the Twenty-First Century, released amid great fanfare last year, the economist argued that inequality isn't just about income. It's also about wealth. Applying data gathered across several decades throughout the world, Piketty argued that when income derived from capital exceeds income derived from work, inequality necessarily widens. Or, in non-economics speak: The easiest way to get rich isn't to make a lot of money. It's to have a lot of assets in the first place. Better yet to inherit it.