The U.S. should increase taxes on the wealthy as the disparity between the rich and poor has reached extreme levels, investor Jeremy Grantham said Thursday.
“I arrived in 1964, and America was a fairly equal place with fairly rapid mobility between socioeconomic classes,” Grantham, an investor who manages more than $100 billion in assets at GMO and is famous for calling the last two market bubbles, told CNBC’s Wilfred Frost. “Now it’s worse than the U.K. I mean, who would’ve imagined that in 1964. We have one of the most unequal countries in the developed world.”
Grantham also said the wealth inequality in the U.S. is approaching that of countries like Brazil and Chile. “So we have a dreadfully unequal society where the average worker, for an average hour’s work, has not made much increase in real income since the mid-1970s, for heaven’s sake.”
According to a report from the Institute for Policy Studies, Amazon founder Jeff Bezos, Microsoft co-founder Bill Gates and legendary investor Warren Buffett — the three richest people in the world— have more wealth than half the U.S. population.
This issue has gained more attention recently as some lawmakers push for higher taxes on the wealthy. Rep. Alexandria Ocasio-Cortez, D-NY, proposed a marginal tax rate of 70 percent on annual income staring at $10 million. Sen. Bernie Sanders, D-VT, wants to raise estate taxes for rich heirs and Sen. Elizabeth Warren, D-Mass., has proposed an “ultra-millionaire” tax.
Those pushing back against wealth taxes argue they could discourage innovation and potentially hurt economic growth in the long run.
But Grantham, who is donating more than 90 percent of his net worth to environmental initiatives, thinks such a levy is necessary. “You need to distribute the income more evenly. The concentration of income and wealth, in particular in the top .01 and .1 and 1 percent has just alarmingly increased.”
“It is, amazingly, economically ineffective,” he added. “Rich people don’t spend their marginal dollars. Poor people spend them instantly. You get a healthier economy if more of the pool goes to the poor than does today. So yes, you have to tax the better off, particularly the super rich.”
Grantham’s net worth is roughly $1 billion.