Following recommendations set out in Thomas Piketty’s landmark Capital in the 21st Century, would-be Democratic 2020 presidential candidate Elizabeth Warren has proposed a 2% annual tax on household wealth over $50,000,000, with an additional 1% annual tax on household wealth over $1,000,000,000, which would bring in $1.9-$2.75 trillion over the first decade (about 1% of US GDP).
The tax would pay for an upgrade to the IRS that would allow it to audit the 75,000 households who are subject to it, and it’s backstopped by a 40% exit tax on the wealth over $50 million of any US citizen who abandons their citizenship to escape it.
The tax also includes a revamp of the tax code to close loopholes and expands international reporting regimes to isolate and frustrate tax-havens.
The plan — which is similar to tax regimes in Spain and Norway — has been endorsed by Thomas Piketty.
By itself, a wealth tax would begin to curb concentration of assets in U.S. society. The redistributive possibilities are also numerous. Cory Booker’s baby bonds proposal, to give every newborn a $1,000 low-risk savings account, with periodic additional payments, that they can tap as adults, would cost an estimated $82 billion per year, less than one-third of the Warren plan. Sherrod Brown’s child allowance bill, a universal cash payout that would cut the child poverty rate in half, would cost about $108 billion a year, not even half of Warren’s proposal. Kamala Harris’ LIFT Act, a massive series of tax cuts for middle-class families, has a $2 trillion price tag over a decade, again less than the Warren wealth tax.Another option suggested by Bruenig would be to place the revenues into a social wealth fund, an investment portfolio of stocks, bonds, and other assets for which every American would have a non-transferable share. This would reduce the concern that asset sell-offs from wealthy taxpayers would depress share prices, since the social wealth fund would effectively buy them back up.
A universal dividend from the growth of the assets in the social wealth fund portfolio would be distributed to Americans, not unlike the dividend given to Alaskans from revenues generated by oil wealth (known as the Alaska Permanent Fund). “This way we snag the wealth and hold onto it permanently for the public,” said Bruenig.
Elizabeth Warren Proposes Annual Wealth Tax on Ultra-Millionaires [David Dayen/The Intercept]
(Image: Tim Pierce, CC-BY)