Can Wealth Taxes Erase Student Debt?

July 5, 2026

Stacks of hundred dollar bills arranged neatly

When a sitting congressman calls a new wealth tax “the ultra-moral way” to wipe out student debt, it puts America’s broken promise of the college dream front and center.

Story Snapshot

Senator Elizabeth Warren’s Ultra-Millionaire Tax Act of 2026 targets about 260,000 of the richest households with a yearly tax on their net worth.
Supporters claim the tax could raise $6.2 trillion over 10 years and say it is a moral way to fund goals like student debt relief and childcare without raising taxes on nearly all other families.
Critics warn real revenue would be far lower because the rich can move money, fight asset values, or even leave the country.
History shows wealth taxes often raise much less than promised, making big plans like canceling student debt risky to count on.

What Warren’s Ultra-Millionaire Tax Actually Does

Senator Elizabeth Warren’s Ultra-Millionaire Tax Act of 2026 would place a new yearly tax on very large fortunes, not on paychecks. Households and trusts would owe 2 percent a year on wealth above $50 million and 3 percent on wealth above $1 billion. This hits roughly the top 0.15 percent of households, around 260,000 families, leaving more than 99 percent of Americans untouched by the tax. All kinds of assets count, including homes, stocks, private businesses, and money held offshore.

Supporters say this tax is aimed at what Warren calls a “rigged economy” where billionaires can pay lower effective tax rates than teachers and use new technology like artificial intelligence to replace workers while their net worth explodes. Warren and her allies argue that asking the richest Americans to pay more each year on their wealth would help rebalance power between regular workers and the small group of ultra-rich families who now hold huge shares of national wealth. This framing fits a deeper anger on both left and right about “elites” protecting their own fortunes while everyday costs keep rising.

The Big Promise: Trillions in New Money and Debt Relief

Backers of the Ultra-Millionaire Tax say the plan could raise about $6.2 trillion over a decade, even after assuming some tax avoidance by the rich. Emmanuel Saez and Gabriel Zucman, economists from the University of California, Berkeley, built the revenue model that Warren’s team cites. Progressive lawmakers, including Representative Pramila Jayapal, argue that this money could pay for programs like universal childcare, tuition-free community college, and expanded health coverage for people 55 and older, with money still left over. That vision is why Ro Khanna and others talk about the tax as a “moral” way to tackle student debt and other burdens weighing down the middle class.

There is a catch: the bill itself does not lock this new money into any specific program, including student debt cancellation. The revenue is not formally earmarked, meaning Congress would still have to pass a separate law to cancel loans or build new services, and could also choose other uses like deficit reduction or defense. For Americans skeptical of Washington, this gap feeds a familiar worry: even if the government brings in more money, the political class might still steer it toward pet projects or special interests rather than clear promises like wiping out student debt.

Can the Government Really Collect That Much from the Ultra-Rich?

Critics argue that the revenue promise behind Warren’s plan is far too hopeful. The business group S-Corp calls the $6.2 trillion estimate “blood from a stone,” pointing out that earlier wealth tax projections by the same economists have been “wildly inaccurate.” A separate analysis of Warren’s 2021 wealth tax by the Penn Wharton Budget Model suggested that version would raise about $2.1 trillion over 10 years, far less than supporters claimed at the time. Research on past wealth taxes, in the United States and abroad, shows they often underperform by 40 to 60 percent once people change behavior to dodge the tax.

One reason is that wealth is hard to measure and easy to move. Former Senator Heidi Heitkamp has warned that trying to tax net worth each year turns into a giant personal property tax, forcing the government to value private companies, art, and other hard-to-price assets that have not been sold. That kind of tax has historically been unpopular and legally murky. Wealthy taxpayers can hire teams of lawyers and accountants to argue values down, shift money into new legal forms, or move assets overseas. These are the same tactics many Americans already suspect are used to avoid paying fair taxes today.

Exit Taxes, Enforcement, and the Power of Elites

To curb cheating and money flight, Warren’s plan includes aggressive enforcement tools. It would invest $100 billion in the Internal Revenue Service (IRS), require high audit rates for ultra-millionaires, and build on global reporting rules so assets hidden abroad still show up on tax forms. The bill also includes a 40 percent “exit tax” on the wealth above $50 million for any citizen who gives up their citizenship, designed to punish people who leave the country to escape the tax. Supporters say these steps prove the law is serious about reaching rich households that have been beyond the IRS’s reach.

Khanna is referencing the 'Ultra-Millionaire Tax Act' also championed by Elizabeth Warren.

Here she is describing all of the great things the government could do by taxing wealth over $50M, including:

“Cancelling student loan debt." https://t.co/teaJpfjCTF pic.twitter.com/QdhIIC4sKH

— Western Lensman (@WesternLensman) July 3, 2026

Opponents counter that even these tough rules may not be enough to beat the deep state of money and influence. The Sanders–Khanna wealth tax proposal, which Ro Khanna backs, uses a higher 60 percent exit tax, signaling worry that rich Americans will still try to flee. Wealthy donors and giant firms like private equity companies that own basic utilities have huge incentives to lobby, sue, or shape media coverage to block or weaken any wealth tax that touches their fortunes. Conservative outlets already attack Warren’s plan as “insane,” arguing that even taking all of Elon Musk’s net worth would not cover a single year of interest on the national debt. All this feeds a broader feeling, shared by many conservatives and liberals, that the system is wired to protect the few at the top, no matter what laws are passed.