Senator Warren Proposes ‘Ultra-Millionaire Tax’ of as Much as 3%

Jan 25 2019, 12:29 AMJan 25 2019, 2:48 AMJanuary 25 2019, 12:29 AMJanuary 25 2019, 2:48 AM

(Bloomberg) -- Democratic presidential hopeful Elizabeth Warren proposed Thursday to impose a wealth tax on Americans worth more than $50 million, a pitch aimed at satisfying the hunger on the left to tackle income inequality.

The plan by the Massachusetts senator, who recently announced an exploratory committee for the 2020 Democratic nomination, would require the top 75,000 households to pay an annual tax of 2 percent on each dollar of their net worth above $50 million. It would rise to 3 percent on every dollar above $1 billion.

“The top 0.1% of American families -- the richest 1 in 1,000 -– now have nearly the same amount of wealth as the bottom 90% of American families combined. Meanwhile, for everyone else, opportunity is slipping away,” Warren said in an email to supporters. “ We need structural change to fix it.”

Warren said she would use the revenue to rebuild the middle class, potentially by using the money to pay for child care or relieve student debt.

The proposal captures Warren’s economic populist message at the heart of her campaign to challenge President Donald Trump in 2020. A former Harvard law professor, Warren has written extensively about the shrinking middle class and made enemies on Wall Street for pinning the blame for rising income inequality on the wealthy and large corporations.

Warren’s plan would do more to relieve inequality than New York Democratic Representative Alexandria Ocasio-Cortez’s idea to raise the top income tax rate to 70 percent, according to Steve Wamhoff, the director of federal tax policy at the left-leaning Institute on Taxation and Economic Policy.

New research indicates that raising marginal income rates wouldn’t do much to lessen inequality, because much of the wealth among the richest Americans stems from private business profit taxed at lower rates and appreciated assets that go untaxed until they’re sold.

“If you believe that inequality is a problem, you have to start thinking outside the box,” Wamhoff said. “We need to go beyond the ideas that are already on the table today.”

Still, critics say that a wealth tax would be very hard to administer. It would require taxpayers or the Internal Revenue Service to calculate how much assets are worth each year, including real estate and investments in private businesses that are notoriously hard to value.

“Imagine a large privately-held company -- its value could change almost daily,” the conservative Tax Foundation said in a blog post Thursday. “How would the tax handle these fluctuations?”

Conservatives Pounce

Warren’s proposal is also likely to face challenges on its constitutionality.

Conservatives immediately pounced on it, with the anti-tax group Americans For Tax Reform arguing that it would “harm economic growth, incentivize the investment of money overseas” and fail to raise as much money as Warren’s allies project.

Increasing marginal rates, wealth taxes and other ways to tax the wealthy are likely to play a central role in all the tax plans Democratic candidates release in the coming weeks, and it’s just a question of which ideas resonate most with the party and voters, said Greg Leiserson the director of tax policy and senior economist at the left-leaning Washington Center for Equitable Growth.

“All of these ideas are closely connected,” said Leiserson. “The general rule is the more you do of one of these the less you can do with the others.”