Tuesday, November 12, 2019
Democratic presidential hopeful Elizabeth Warren has made a potential federal wealth tax a pillars of her campaign. This would evolve the system in which the US federal government gets the majority of its revenue (income tax) by not only taxing the gains on investments, but also on the principal of those investments. A federal wealth tax would hit a household’s complete net worth every year, falling on all assets including homes, portfolios of stocks and bonds, art, land, etc.
Warren has proposed what her campaign calls an “ultra-millionaire” tax of 2% on assets above $50 million, plus a 1% t “billionaire surtax” on assets above $1 billion. Another candidate, Bernie Sanders, has put forth a plan that starts at 1% on net worth above $32 million, and raises taxes in steps until it arrives at 8% for wealth over $10 billion. Bill Gates is worth $107 billion, and under Warren's plan would have to cough up $6.4 billion while under Sanders' plan his invoice would stand at $8.4 billion.
Extreme wealth inequality is the reasoning for the push for taxing a person's wealth instead of simply their income or capital gains. The Unites States has the largest wealth inequality of any developed country and as of 2012 22% of the country's wealth could be found among the .1% richest Americans. The wealthy are no longer ashamed of avoiding taxes, though this was not the case decades ago. “The attitude of people in power matters a lot,” said Emmanuel Saez, an economist from the University of California at Berkeley who designed the ultra-millionaire tax. “Franklin Roosevelt spent a lot of time on the radio shaming tax dodgers.”
See Brendan Greeley, The Wealth Tax Plan Worrying US Billionaires, Financial Times, November 11, 2019.