[fblp]

This grossly simplifies things.

In the US the max federal tax rate is 20% on capital gains, that is the gains realized when you typically sell an asset. The max tax rate on ordinary income is 37%. Some states don't tax at capital gains at all. Others make also tax capital gains.

There are a myriad of loopholes to defer and minimise capital gains ranging from QSBS (first 10mil in small businesses) to trusts to foundations to offset losses. Billionaires are incentivised to hold their assets and let them accrue rather than deploying that capital.

Yes, you could argue that billionaires have earned his billions. But could you really argue that the tax system should be configured to reward them for sitting on those billions and those gains should be taxed at a rate lower than someone working every day to earn 200k in wage income?

The economy has a fundamental division between those who earn income off the gains on assets, and those who earn an income on wages. Wealth taxes help level the playing field by those who already have a tax system in their favor.

Trickel down economics does not work when you earn more holding on to what you have.