More billionaires would help the economy says Larry Summers

The man has a soft spot for billionaires.

That could be a strong one. In a recent wide-ranging conversation with Fortune about inflation, the economy, and billionaires, Summers said we need more rather than less of them.

He thinks it is important to keep the freewheeling entrepreneurial culture because they are also mega- job creators. He thinks they are under- taxed. He said, "If we had more people like Jeff Bezos and Bill Gates and Steve Jobs, that would be great for America." A whole set of tax changes that would make them pay more and complicate any attempts to form intergenerational dynasties for the benefit of their great-grandson is what he favors. The American ideal of equal opportunity is undermined by the ease with which the rich can pass on their wealth.

He wants to greatly expand the reach of the IRS, and has the research to show why he wants to tax the super wealthy more.

The payoff if the U.S. raised funding for the IRS to greatly expand tax enforcement and auditing was researched by Summers and a Harvard Law professor. There was a chance that a Democratic president would look to strengthen the tax system without changing tax rules.

According to the paper published in July of 2020, 15% of all federal tax revenue would go uncollected over the next ten years. The IRS wasn't funded well. The agency has seen a 15% fall in inflation-adjusted appropriations in the past decade. The number of agents working on high-income returns has gone down. It has an outdated software system that is the oldest in the federal government.

According to the two authors, the IRS could make more money by spending more money on enforcement. They estimated that $82 billion in new funding over the next ten years would restore outlays to their share of GDP. Deterrence is the perception that as taxpayers see more audits and enforcement, they use less risky strategies to skirt taxes.

The research was included in the recently- passed Inflation Reduction Act, as an assistant secretary for economic policy. In the bill, the CBO found that an additional $80 billion in appropriations to the IRSCK should result in net gains over the course of the next two decades. The CBO didn't include any benefits from deterrence in their analysis. The offbeat idea was designed to create a deficit-reducing budget victory for the president.

The full story on how Summers is playing a key behind- the-scenes role in the fight against inflation can be found here.

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