Elizabeth Warren proposes wealth tax on people with net worth above $50 million

[Travis B]

https://www.cnn.com/2019/01/24/polit...ets/index.html

Sen. Elizabeth Warren is proposing a new tax on Americans with assets of $50 million or more as part of a bold new initiative to reverse the increasing concentration of wealth among the country's richest households.

According to documents provided by Warren's presidential campaign, the plan would impose a 2% tax on Americans whose net worth exceeds $50 million, with an additional 1% levy on billionaires. It does not specifically address marginal tax rates.

The proposal is among the first and most detailed steps taken by a top-tier Democratic primary hopeful to address what has become, in the aftermath of the 2008 financial crisis and Occupy Wall Street movement, a key issue for the party as a leftward shift that began during the 2016 primary accelerates under President Donald Trump.

Taxing wealth, however, could be very difficult to do. First, there are questions about whether it is permitted by the US Constitution, with legal scholars falling on both sides of the argument. The Constitution gives Congress the power to levy taxes -- such as tariffs on commerce. However, it places limitations on so-called "direct taxes," though the definition of these has long been unclear.

A 19th century Supreme Court ruling struck down a federal income tax that existed at that time. But the 16th Amendment, which was ratified in 1913, established Congress' right to impose a federal income tax. Also, an early 20th century Supreme Court ruling upheld the ability of Congress to levy an estate tax.

Warren aides told CNN they are confident it would survive any legal challenges posed by questions over its constitutionality. They also believe that, while the bill would be a non-starter in a Republican-controlled Senate, it could be passed via the reconciliation process by Democrats if the party took control of the chamber in 2021 or later. That process requires only a simple majority of voters rather than the 60 most laws need to break a potential filibuster. The aides added that the campaign has not discussed the plan with any other declared or potential presidential hopefuls.

In a pair of letters provided to CNN by Warren's campaign, 17 signers, including multiple former heads of the Office of Legal Counsel at the Department of Justice, wrote in defense of the plan's legality.

"Constitutional text and history demonstrate that 'direct' tax is best interpreted as a narrow category that would not include a net worth tax (like the one Warren is proposing)," one of the letters states, arguing the plan "falls squarely within Congress' broad taxing power."

Gene Sperling, a former National Economic Council director under Presidents Bill Clinton and Barack Obama, tweeted his support for the plan on Thursday afternoon.

"Wealth inequality in our nation is a national scandal. This type of wealth tax that (Sen. Warren) is proposing is essential," Sperling said. "It frees up dramatic amounts of resources that make it more likely the vast number Americans can have economic security & a shot at their own small nest egg."

University of California Berkeley economics professors Emmanuel Saez and Gabriel Zucman, who are well known for their work on income inequality and taxing the rich, worked with the Warren team to analyze the proposal, a source confirmed to CNN. The Washington Post first reported on the plan.

Saez and Zucman estimate that 75,000 households -- less than the wealthiest 0.1% -- would be subject to this wealth tax. That group has a net worth of roughly $9.3 trillion, they estimate. Billionaires are worth an estimated $2.5 trillion. The plan would raise around $2.75 trillion over 10 years and the "billionaire surtax" alone would bring in $25 billion in 2019 from roughly 900 families. Both taxes would raise $212 billion this year.

The professors determined that the plan would raise around 1% of the gross domestic product per year.

"One of the key motivations for introducing a progressive wealth tax is to curb the growing concentration of wealth," they said in a letter addressed to Warren and provided to CNN.

The top 0.1% of families control about 20% of the nation's wealth in recent years, up from 7% in the late 1970s, they said. Meanwhile, the share of wealth held by the bottom 90% has fallen to 25% from about 35% in the late 1970s. This is mainly because the bottom 90% has racked up debt, including mortgages, consumer credit and student loans.

Currently, the wealthiest 0.1% of families are projected to pay an average of $3.68 million -- or 3.2% of their net worth -- in federal, state and local taxes in 2019. The proposed wealth tax would add an extra $1.27 million, bringing the total tax burden to 4.3%, the professors estimate.

The bottom 99% of families have a total tax burden of 7.2% of their wealth. This is because they are mainly taxed on income from their labor, while the rich make money from their wealth and that's taxed at a lower rate.

How do you feel about a wealth tax?

[Flarelaine]

https://www.cnn.com/2019/01/24/polit...ets/index.html

How do you feel about a wealth tax?

I believe that all modern societies need to address wealth inequality in one way or another.

[Slybak]

How do you feel about a wealth tax?

Anyone who pays property taxes on a home is paying a wealth tax; its just a wealth tax that only applies to real property (i.e. land, buildings, etc) and not intangible kinds of personal property like stocks and bonds.

I mean if you're a middle-class homeowner whose paying an effective 1-2% property tax every year on the value of your house, which if you're middle-class is your biggest asset, you should be pretty pissed that rich people aren't paying any property taxes on their intangible assets.

[Wyrt]

Wealth inequality is a very serious issue that needs to be addressed. I'm open to seeing how various solutions would work out.

[Zaydin]

Anyone who pays property taxes on a home is paying a wealth tax; its just a wealth tax that only applies to real property (i.e. land, buildings, etc) and not intangible kinds of personal property like stocks and bonds.

I mean if you're a middle-class homeowner whose paying an effective 1-2% property tax every year on the value of your house, which if you're middle-class is your biggest asset, you should be pretty pissed that rich people aren't paying any property taxes on their intangible assets.

Not sure what middle-class homeowners have to do with this.

If you are middle-class, you wouldn't get hit by a wealth tax like this. Odds are that the total people who would be affected by this probably does not exceed four digits.

[Slybak]

Not sure what middle-class homeowners have to do with this.

If you are middle-class, you wouldn't get hit by a wealth tax like this. Odds are that the total people who would be affected by this probably does not exceed four digits.

Of course middle-class people wouldn't be hit by Warren's proposed tax, because their net worth, if they have any, primarily comes from their home value and no middle-class home is valued at over $50 million, which is when the tax would kick in. "Property taxes are wealth taxes" is the point. And the ~85 million Americans who pay wealth taxes on their homes should be mad that rich people aren't paying wealth taxes on the largest share of their net worth (stocks, bonds, and other financial assets).

[Derpling]

A good start. 3% isn't high enough, but it's a whole hell of a lot better than things are now.

[Toppy]

Anyone with half a brain and basic knowledge of how the world works know that a wealth tax is needed.

The only arguments I ever see against it are typically gut feeling and heavily debunked studies.

[Poopymonster]

Anyone with half a brain and basic knowledge of how the world works know that a wealth tax is needed.

The only defenses I ever see against it are typically gut feeling and heavily debunked studies.

But but but, when I'm a gorillionaire, I don't want to pay that tax, so I'm against it now!

[SirBeef]

But but but, when I'm a gorillionaire, I don't want to pay that tax, so I'm against it now!

If one becomes a gorilionaire, does that mean they can sit around and toss poo ant anyone?

[Xeones]

Our economy has only got weaker as the wealth inequality has expanded.

[Worvon]

How do you feel about a wealth tax?

You mean returning to policies that made the US so prosperous before Reagan destroyed it? Of course, every real American would love that.

[Spectral]

This seems sensible when it comes to cash holdings and other liquid assets, plausible for personal goods owned such as homes and vehicles, but fairly insane for ownership of a corporation. It's hard to take the idea that someone who founds a company should pay 3% of the value of that corporation per year as a "wealth tax" and it seems assured if that was attempted the actual tax incidence wouldn't fall on the owner.

That's fairly easy to exempt from the actual tax though. I'd have no problem with someone who owns a $50 million house (for example) paying $1.5 million/year in taxes on that house to the federal government. The apparently unequal return on capital over labor almost necessitates this to prevent radical concentration of wealth.

[Citizen T]

I am adamantly against this and I do not believe it would pass Constitutional muster unless our fearless representatives and senators want to commit political suicide.

Article I, Section 9, Clause 4: No Capitation, or other direct, Tax shall be laid, unless in proportion to the Census or Enumeration herein before directed to be taken.

The only direct tax that can violate this is the income tax which required the 16th Amendment to allow.

Now, legislators (with the President's approval/signature) could impose this tax in proportion to the Census/Enumeration if they'd like. But this would an extremely regressive tax that would devastate poorer areas.

[xChurch]

I wish we could start with just getting rich people to actually pay all the taxes they should be in the first place.

[kaid]

A good start. 3% isn't high enough, but it's a whole hell of a lot better than things are now.

Its now just on income it is on total wealth so it's pretty reasonable. If they could enforce it strongly enough it could claw back a fair amount of cash that is just sitting out there overseas so we can maybe repair our roads/bridges/schools correctly.

[Zaktar]

Anyone with half a brain and basic knowledge of how the world works know that a wealth tax is needed.

The only arguments I ever see against it are typically gut feeling and heavily debunked studies.

But but then all the rich will leave us and what will we do when they're all living in China????

I am adamantly against this and I do not believe it would pass Constitutional muster unless our fearless representatives and senators want to commit political suicide.

Article I, Section 9, Clause 4: No Capitation, or other direct, Tax shall be laid, unless in proportion to the Census or Enumeration herein before directed to be taken.

The only direct tax that can violate this is the income tax which required the 16th Amendment to allow.

Now, legislators (with the President's approval/signature) could impose this tax in proportion to the Census/Enumeration if they'd like. But this would an extremely regressive tax that would devastate poorer areas.

Couldn't a wealth tax be equally laid on the full population, but be progressive, and the threshhold for any taxation only start at >50m? How would that be different from progressive income tax brackets?

[Xeones]

I am adamantly against this and I do not believe it would pass Constitutional muster unless our fearless representatives and senators want to commit political suicide.

Article I, Section 9, Clause 4: No Capitation, or other direct, Tax shall be laid, unless in proportion to the Census or Enumeration herein before directed to be taken.

The only direct tax that can violate this is the income tax which required the 16th Amendment to allow.

Now, legislators (with the President's approval/signature) could impose this tax in proportion to the Census/Enumeration if they'd like. But this would an extremely regressive tax that would devastate poorer areas.

Fortunately congress has access to constitutional lawyers and scholars who can help craft laws to follow the constitution and still perform necessary functions.

[Spectral]

I am adamantly against this and I do not believe it would pass Constitutional muster unless our fearless representatives and senators want to commit political suicide.

Article I, Section 9, Clause 4: No Capitation, or other direct, Tax shall be laid, unless in proportion to the Census or Enumeration herein before directed to be taken.

The only direct tax that can violate this is the income tax which required the 16th Amendment to allow.

Now, legislators (with the President's approval/signature) could impose this tax in proportion to the Census/Enumeration if they'd like. But this would an extremely regressive tax that would devastate poorer areas.

This seems like a pretty important point. Regardless of whether it's a good policy idea or not, the only constitutionally valid way to impose such a tax would be via Amendment. It's pretty hard to see a realistic path to such an Amendment at present.

[kaid]

But but then all the rich will leave us and what will we do when they're all living in China????



Couldn't a wealth tax be equally laid on the full population, but be progressive, and the threshhold for any taxation only start at >50m? How would that be different from progressive income tax brackets?

It is going to be laid on the nation like any tax. It is just that it is progressive so until you hit the minimum threshold you unaffected by it. I don't see how the constitutionality of this gets challenged because it is nothing much different than what we have done in the past on even wider basis.