Our problem is wealth inequality that has turned us into a plutocracy. A wealth tax seems like a no-brainer. If these economists numbers are low then increase the tax.
33
Interesting conversation... has anyone considered that a wealth tax would just shift money from one small group to another small group? It appears as though a wealth tax would solve all our problems... but only if that money is used effectively... How likely is that?
What if the government used the taxes more efficiently?
Second what if we created an environment where more people could get rich?
I get the impression that many view wealth as static... something that is in finite supply but that’s not true. Wealth is created... and the more people that create wealth the more there is.
There is room for reforms but taxing the wealthy right now... seems like straightening chairs on the Titanic... it’s not going to solve the real problems.
17
I am not sure that the wealth tax is fair, as opposed to income taxes on the earnings of wealth. The wealth tax will drive the capital, and the wealthy, of the country like it did in France. Wealth taxes have been tried and abandoned in some European countries, as they drive working capital out of the economy.
18
Of course, we already have a wealth tax: it's the tax on real property which is collected almost everywhere in the country. The wealth tax Saez and Zucman advocate generalizes that tax to cover financial assets as well. In my understanding, most of the wealth which would be subject to the tax has never been taxed before or has been grossly under-taxed because of tax policies which explicitly favor capital accumulation over labor income. This wealth tax, which would affect a tiny number of household, would help fix tax mistakes of the past four decades. And its goal is not "to soak the rich" but to collect tax revenue badly needed to meet our common needs, such as education and infrastructure. Sign me up as an early and enthusiastic supporter of their proposal.
56
I looked for a moment in history that resembles this one. I could only think of ancient Athens before written history and the poet philosopher Solon that saved Athens from the fate I see on America's horizon.
The cradle of Western Civilization was in decline precisely because of income inequality. The bankers and business men were in complete control and Athens best and brightest were for the most part indentured servants. That is what happens as wealth is concentrated at a top that recognizes worth only in terms of drachmas.
I can only imagine how dire the situation was for Athens to call upon a poet philosopher to get Athens back on track and rein in the power of its oligarchs and plutocrats.
It is not difficult to imagine how devastated and demoralized the Athenian intelligentsia was living as indentured servants under the rule of those with large bank accounts whose only desire was bigger bank accounts. I need only to look south and see Vermont trying to recover from the disaster of putting its hopes for the future in the hands of investors who conned them out of a fortune promising to revive a moribund tourist economy.
Solon cancelled all the student and credit card debt of Athenians so the intelligentsia could again move Athens forward to what eventually became The Enlightenment 2400 years later.
America is at the Solon moment but the propaganda is so overwhelming that the people who understood the importance of hope left in Pandora's box have no sway even at Harvard.
18
This issue is basically a philosophical one, grounded on the fundamental concepts of property and the differing claims of societies and individuals. Those claims were most thoroughly plumbed by John Locke in the 18th century, and he came down on the side of individual property rights--with no consideration of limitations, and not much of the skewing effects of unlimited wealth accumulation. Those rights, enshrined in "liberal" philosophy and governance, along with other rights accorded to individual citizens, have ruled world thought ever since.
Today's critical need--one that is extremely difficult to accomplish, given the entrenched and long-held assumptions of all liberal thinkers--is a clear-eyed examination of the real effects of massive private accumulation. That should include consideration of a concept much-discredited in nearly two centuries of blundering experimentation: What are the legitimate claims of "society" in placing limits on the individual possession of vast resources? Those resources are of course at root financial, but in application convert to various forms of power: Influence, market power, and finally to control over the very decision processes by which societies determine their own future.
It is the last-named considerations that now need to be examined carefully and with fresh eyes--and the immediacy of review is quite evident when we ask: What will be the scope for individual freedom in a world dominated by wealth and its wielders?
21
"Despite having amassed no pledged delegates to this point, [Bloomberg's] campaign has called on other candidates to exit the race so that he can run head-to-head against Mr. Sanders."
That's why we need a wealth tax.
31
why not just start with just eliminating all deductions for incomes over - whatever seems reasonable? The will save accounting expenses and we will have more income to improve everybody's life and the IRS will have less auditing expenses.
6
Everyone complains about taxes, in the same breath as they complain about how terrible the roads are.
After WW2 Americans began to feel economic comfort and became the "middle class". Once that happened, and some became more than middle class in wealth and income, taxes became an expense, or extraction of what they became to believe was theirs to keep.
The republicans, from Goldwater on, made government the bad guy, and taxes are bad because they make the government bigger and badder. Forget that taxes became "investments", like going to the moon, building the interstate system and expanding college opportunities.
The problem with any discussion of taxes is not the amount, but the description of what taxes are. The US now thinks of treasury borrowing as a source of revenue, and republicans seem okay with using it instead of taxes to run things.
A better idea...treat federal spending like local spending. Take the total amount, then assess that amount against the "value" of everyone's income instead of their property. No exemptions, no deductions. The wealthy pay their income tax with wealth anyway, you just can't create a system of assessing wealth.
8
It's a shame that more people aren't paying attention to what Andrew Yang has to say. They saw him as a gimmick candidate, yet sit around and ponder how to fix the financial problems of our country. His idea of a sliding scale VAT is a great way to tax the rich in a way they can't hide from and skips extra bloating on the bureaucratic IRS. Household necessities wouldn't be taxed much if at all, but if Bezos wants to buy a $165M house for his girlfriend tax it with VAT. Europe has VAT all over and it's very successful, unlike their failed wealth taxes. VAT is just one of several ways in Yang's plan to pay for Universal Basic Income. Let everyone be shareholders in this great economy we have, or the haves and the have-nots will continue to separate in ways that will destroy us. Capitalism isn't bad, we just need to make it work for everyone = Human Capitalism.
73
@Debbie I liked Yang's proposals. For a long time it seemed a gimmick until I took a look. His ideas are too new to go anywhere right now, but in the future, we should consider them.
If you have a VAT that excludes necessities like food and medicine, along with the UBI, that could reduce a lot of pain during restructuring.
If you look through Yang's lens, Sander's policies like having workers get stock in their companies seem antiquated. If all the workers are robots, that sounds a little too close to '2001: A Space Odyssey' for my comfort.
9
@Debbie,
Here’s the thing with politics, it’s about building a coalition, and that takes having to drop out of races, and losing some too, but if politics is your thing, then you get back up, and keep spreading your message. Andrew Yang, has 4 years to keep his message alive. Andrew understands “Those who understand the cause are called to it”. He’ll be back.
13
Among other reasons, I support a wealth tax due to the existing inequities in the current tax structure that no one seems to want to address. These include capital gains taxes, carried interest, estate tax exemptions, stepped up bases, and gift tax exemptions. As a result of these inequities, so much wealth is never taxed or inadequately taxed during a person's lifetime.
Capital gains taxes allow one to pay a fraction of the tax one would pay if the gains were treated as ordinary income, and for what reason -- to encourage investment? What else are you going to do with your "excess" money other than invest it?
Carried interest is a complete scam.
The estate tax exemption allows a couple to transfer $23 million to heirs, and the stepped up basis provision protects the gains that are transferred from ever being taxed.
And gift tax exemptions allow a couple to transfer $30,000 per year to relatives and others without tax. We have three children, two of whom are married, and four grandchildren, so we could transfer $270,000 per year just to them.
A wealth tax would ensure that all of these monies are taxed at some level.
57
@RunDog Sounds like you’re against people inheriting money tax-free and I just simply don’t understand why. Why should the government be able to confiscate money from you simply because you’ve inherited it from a family member? That’s lunacy. It’s obvious you believe that the government owns a piece of everyone’s monetary life. Sadly, that’s the definition of tyranny.
15
@Philip Government taxes most financial transactions. Employment income, interest income, dividends, product transfers (sales), services, real property transfers, lottery winnings ... Why should the transfer of inherited wealth receive a special exemption?
Sadly, it's hard to recognize privileged treatment, when one may be a recipient. Expecting tax-free transfer of wealth is a classic example of entitlement.
31
Because they didn’t earn it and wealth disparity is destroying American democracy.
22
I’ve never understood why a robust minimum wage wouldn’t solve literally all problems.... Just pay folks fairly up front, rather than pairing a subsistence wage with “free” programs like food stamps, “free” preschool for children financed by high taxes on others. Just mandate a living wage up front, and then nix the various programs!
24
@GBR Good idea, but what about people who are unemployed?
5
My walking buddy, Calvin Johnson, tax and con law professor at Texas, wrote a paper similar to the Summers - Sarin paper. Using a more conservative mortality rate, he estimated the wealth tax would raise 1/4th of the estimated amount.
A 2% wealth tax would be significant. Because Prof. Johnson gave me reading assignments for our walks, I've browsed thru a couple of Saez and Zucman papers. They estimate a 6% return on capital. So, a wealth tax of 2% is roughly equivalent to a 33% tax on the income from the capital. Combined with the 37% top rate in '20, that's a total tax of 70%, a rate not seen since 1981. That doesn't take into account inflation. A 6% nominal rate of return with a 1% rate of inflation is a 5% net rate of return. So, a 2% tax on wealth is a 40% tax on income, for a total of 77%.
10
In one's Estate, assuming that it is possible to determine an agreed value for a taxable asset (e.g. a picture) how is it possible to determine with "cash" its value that has increased over time? Part of the "cash" will likely have been taxed in previous years so double taxation becomes of concern. A wealth tax would also transfer more of the decision-making as to its use to government. Can it make better allocations than the taxpayer?
5
Only four countries today have a wealth tax; Switzerland, Spain, Norway, and Belgium. From the Business Insider, "4 European countries still have a wealth tax. Here's how much success they've each had".
"Most European governments eliminated the tax because it was problematic in design and enforcement, and France was the latest to scrap it in 2017. They often hit people with plenty of assets but little cash on hand to pay the taxman..."They can be really difficult to administer and ensure even a moderate compliance rate," Daniel Bunn, the director of Global Projects at the nonpartisan Tax Foundation".
"A lot of roads are paved with good intentions, but they usually don’t end up anywhere good."
Also "the law of unintended consequences, often cited but rarely defined, is that actions of people—and especially of government—always have effects that are unanticipated or unintended."
11
From Wikipedia, "Wealth Tax":
"In 2004, a study by the Institut de l'enterprise investigated why several European countries were eliminating wealth taxes and made the following observations: 1. Wealth taxes contributed to capital drain, promoting the flight of capital as well as discouraging investors from coming in. 2. Wealth taxes had high management cost and relatively low returns. 3. Wealth taxes distorted resource allocation, particularly involving certain exemptions and unequal valuation of assets. In its summary, the institute found that the "wealth taxes were not as equitable as they appeared".[38]
Former British Chancellor Denis Healey concluded that attempting to implement wealth taxes was a mistake, "We had committed ourselves to a Wealth Tax: but in five years I found it impossible to draft one which would yield enough revenue to be worth the administrative cost and political hassle." The conclusion of the study stated that there were lingering questions, such as the impacts on personal saving and small business investment, consequences of capital flight, complexity of implementation, and ability to raise predicted revenues that must be adequately addressed before further consideration of wealth taxes."
12
At least they tried something, clearly what we’re doing isn’t working, giving more to those who don’t need it, is a very poor use of tax dollars.
5
"Last year, the faculty at Harvard’s Kennedy School of Government voted to offer Mr. Zucman, 33, a tenured position. But Harvard’s president and provost nixed the offer, partly over fears that Mr. Zucman’s research could not support the arguments he was making in the political arena, according to people involved in the process."
It seems more likely that that Harvard's president thinks that having Zucman on the faculty would make it harder to get big donations from wealthy people.
44
Im finally in a career high point in my mid 40's and am making $400,000 a year after 20 years of making a fraction of that. im already paying well over $150,000 to the government and $20,000 to my local government.... we all pay taxes on everything we purchase, and don't forget car and home insurance, which is basically another tax...... how much tax do you want to take from me? how am I supposed to save? how am I supposed to pay for my child's college? I don't care about inequality, just stop taking me money.
16
@simmons A wealth tax on over $50m probably won't effect you for quite a while. When you get there, it only means you make 2% less return on your wealth over $50m. You could consider that an additional tax on (average) unearned income at the very high end.
20
@simmons I take your point and sympathize with you - none of us want to lose what we have.
Your statement "I don't care about inequality, just stop taking my money" becomes somewhat different when rephrased to "I don't care if other children have no food, and are homeless because I have to send mine to college."
We are a community, and it is our community which enables to you have a home, educate your children,etc. As a responsible American I am sure you want to find a way that we can all feed our children and educate them.
13
@simmons
You were taught to read and cipher but not to think. I am going to assume Athens Georgia not the cradle of our civilization. 200 grand net is solidly middle class and will never make you super rich. The USA has one of the highest rates of inequality and the largest number of people who cannot handle an unexpected 400 dollar bill.
We have healthcare education and a guaranteed 1200 USD per person guarantee. Our economy is booming we are a world leader in new start-ups, a worker shortage for a generation and we have no shortage of billionaires.
Maybe Piketty , Saez and Zucman are French but the founder of the economic school that studies inequality was Britain's Tony Atkinson.
You are rich beyond anything previous generations could have imagined . Life is not zero sum for the civilized world win/win is the reality of of technology and an ability to improve the quality of life for all.
America is sick, some of us are on the fence about whether hope is still alive in Pandora's box. Nobody is considering diminishing your wealth or security but believing you will be negatively affected by Saez and Zucman is insane. It is precisely the policy of a chicken in every pot that made you and people like you the envy of the world.
The world can hear America's foundation crumbling. It has been crumbling since 1965 as equality has given way to plutocracy and oligarchy.
We saw Ukraine become the most unequal country on the planet and the most corrupt of all European countries.
13
I love them!
5
And I know these guys are the real thing by the way the French economy is doing. Are the Yellow Vests protesting again this Sat. Did Macron also pass on their advice. Did either of them predict the 08 recession. The government doesn’t care about wealth in Obamacare and food stamp eligibility. How is the government going to track all my overseas properties or the gold bars under my bed.
5
How difficult would it be to collect a wealth tax in the US?
Taxation: EU list of non-cooperative jurisdictions
American Samoa.
Cayman Islands
Fiji.
Guam.
Oman.
Samoa.
Trinidad and Tobago.
US Virgin Islands.
Vanuatu.
Note: the list contains US territories,
8
Wealth taxes big problem is the elephant in the room, how do you calculate wealth. ? Private equity start ups often have a floating zero.
Art collections, high end basically a factor of 2 to 5 , could be twice, 5 times?
How about bitcoin? Hidden offshore, Varys all over.
Real estate, high end is all over the place.
On the Trump side of real estate read up on some of the crazed valuations.
Point being liars figure and the multi multi millionaires have a lot more CPAS and lawyers than the government.
REALITY
To be clear I believe in restoring and even raising estate taxes, raising taxes on earned income at least to Obama era. ( 1960 rates a bit much).
Raise cap. Gains tax rate to income rate at least for anything over 100k.
Chop out the Romney Wall Street “ earned interest” loop hole.
Raise SS taxable income. Mayhap with a “ special tax on income over 1 million.
Then let’s see.
8
@HJR Agreed. How do you realistically revalue art, real estate, privately owned businesses, every year? Much better to close existing loopholes in the income tax (including corporations) and return to the one time estate tax, possibly at 1990 rates updated by adjusting for inflation.
4
@Willyftl Valuation problems are a real issue, but 0% tax is unlikely to be the optimal solution.
1
Why wasn’t Paul Krugman consulted about this topic for this article? Seems like there should be better concrete reporting and interviews with more direct expert economists instead of those on the sidelines offering opinions versus researched prognoses. A good subject but a fishy smell indicating important trails were intentionally skipped.
6
“If we have the wealth tax data, we will see who is right,” Mr. Saez said. “If we’re wrong, fine. If it turns out there is no wealth concentration in the United States, we don’t need a wealth tax.”
It's obvious there's something wrong with our tax code when you have multi-billionaires with more money than they could ever need and hard working folks barely or not making it. The nature of unregulated capitalism is oligarchy which expedites buying of elections and/or interference in tax policies by the ultra-wealthy. I'm for the wealth tax--- let's try it as Mr. Saez recommends. Maybe a wealth tax might encourage a rational overhaul of the tax code.
9
The theory of these economists can be boiled down to this: if one sees a thin man and a fat man standing next to each other, one can conclude that the fat man stole food from the thin man. And if the thin man is a member of an "underrepresented minority", then racism, sexism, and anti-LGBTGism contributed to the disparity in weight.
8
Not surprised Harvard turned them down. Harvard, MIT and U Chicago were the ones that promoted Econ 101, the most conservative set of economic nonsense anyone ever saw. And this class is a required class for graduation in 22 states!
History shows that Econ 101 was Rockefeller's view of the world. He founded University of Chicago and bailed them out during the depression. It was his trust fund that provided a full ride Harvard scholarship for Paul Samuelson after he graduated U.Chic. Samuelson was and an early Nobel prize winner in the battle against socialism. Rockefeller got what he paid for with a "science" that proved Unions didn't help workers, minimum wage caused unemployment and regulation was bad for the economy. The class is garbage promoted by US Universities fighting socialism. Harvard has not stopped fighting.
To make matters work, an early drop out physicist by the name of Edwin B. Wilson, used the AAAS to block any move by scientist to blow the cover on Samuelson's fraud. Econ 101 is not science, it is a cleverly disguised attack on socialism.
Socialism is a fundamental part of a healthy society. Libraries, schools, Universities, Roads, etc. make success easier for everyone to find. Taking these away strangles the middle class. Look at college debt, a boat anchor for many.
Shame on Harvard, MIT and U. Chicago.
27
Let's give wealth tax a try. We've tried trickle down for four decades now and it's not working. Time for another shot
18
Economics without data is junk non-science. This may have worked in the past, especially with the Chicago school and the dumb-as-doornail GOP operatives like Reagan to fool dumber-than-doornail Americans. Seems to me that the old time economists are feeling threatened that their unjustified doctrines are being challenged by data and by intellectually vigorous younger economists. Good for Zucman, Saez and Piketty to forcefully make their case!
15
The wealth tax sure worked out in France!
3
@J Yes, no question the average French citizen enjoys much better quality of life - and even longevity - than the average American.
5
No doubt the details of concentration of wealth need more investigation, but there can be no doubt that such concentration has taken place and greatly accelerated in the last 4 decades in significant part due to outrageous tax bias. How slavish of Harvard to rescind their offer to Mr. Gucman, but that's UC Berkeley's great gain. Elizabeth Warren's early and open pledge to modestly tax the assets of the billionaire and multi, multi- millionaire class helped put this type of plan on the election map. That's the most important motive for big money donors dumping some millions of dollars in Buttigieig's and Klobuchar's campaign coffers followed by a major upward tick in their campaign attacks that Warren was just a spend-money maniac who would further pinch the middle class on taxes.
10
The facts are clear: wealth has been systematically redistributed upward and is now drastically concentrated in the top .001% of Americans. This calculation may be more dire considering the many ways the rich hide their money.
It is not good for the US economy to have half a million folks living on the street, uninsured & sick, flooding ERs, unable to work or pay taxes...let alone the millions enraged as tech makes their past job skills devalued. Childhood & post HS Education is essential for US global competition. Infrastructure must be upgraded as well.
Social stability with economic coherence serve prosperity. Corporate tax cuts are an inadequate tactic for the necessary stimuli for sustainable long term growth. A balance of market incentives and grassroots support is the answer. That requires new revenue from the top.
13
Taxing wealth as a solution to inequality is adjusting outcomes. The problems lie in the systems that produced the inequality. The old clothes man convincing a buyer that there is still value left in an old pair of pants is limited in the scale of his operation. Financial capitalists can move vast sums of money, generating enormous sums of unearned income, at the press of a button. With an algorithm, the button is pressed every microsecond, by a computer. The old clothes man works with one customer at a time, with time needed to find the next customer. Customers need time to earn their dollar for the pair of pants offered. An internet connected business can make a million customer transactions in a day and offer a million different products. But every transaction needs a buyer and a seller and if a lion's share of the profits go to only a few, imbalances are established. The circular flow of money and it's distribution, limits the velocity of the process. Wealth accumulates. It is also questionable that many of the transactions are socially useful or environmentally considerate. The recent adaptation of free market principles and the enormous scope of individual transactions possible, many being paper assets, may benefit individuals, while ultimately leaving the community wanting and the economic systems out of balance and corrupted.
2
A wealth tax is a wonderful idea for starting to deal with the poisonous (to democracy) effects of income inequities. It will also make programs financially viable that address the same lack of opportunities. I cannot help but think that those who would be subject to a wealth tax achieved some of their massive wealth by taking advantage (legally) of a tax structure that gave them enormous breaks, so asking them to pay 2 cents per dollar for wealth over 50 million (per Warren proposal), does not offend me.
7
Sometimes when you need a course correction extreme ideas can help. In the Reagan era Milton Friedman was advocating for the abolition of government funded science research, privatization of all sorts of public services etc. What we got was a tax cut and some modest deregulation. The Zucman-Saenz wealth tax is helpful in starting a course correction back toward progressive taxation. If all we get in the end is repeal of the carried interest rule, and an equal tax rate for Warren Buffett and his secretary, that would be great.
10
1. First, what is the underlying issue driving this article?
Is it the obvious need for resources to enable the major improvements our nation needs in soft infrastructure (education, essential disease care, citizen support, etc) and hard infrastructure (transportation, communications, power, environment, etc)?
Or is it a way to ameliorate our dreadful socioeconomic and political inequality to improve the nonwealthy’s chances of having a decent life in our backward, “capitalist”. nation?
Or, is this simply a summary of the disagreements among economists who have different views and/or different analytic approaches and/or different social values?
2. Why does the article not deal with levels of taxing wealth that would clearly not damage the uber wealthy, yet bring in significant necessary resources to enable necessary work to be done in this country?
3. The article ignores the issue of profligate spending on our military and the unbridled increase in deficits caused by inappropriate tax reductions.
Comments appreciated on these points (especially from the writers of the article).
10
Another invasion of Privacy!
Will every person be required to list all their assets and debts each year lto the IRS?
The complication and loopholes in filing Income Tax each year is
burdensome...and who believes the income tax system is fair.
How long before there would be loopholes in the Wealth Tax?
And another opportunity for hacking.
It all makes me very uncomfortable.
Redistribution of wealth is a good idea. A wealth tax in the hands of our government...not so sure.
4
I remember Tony Atkinson.
America is dying faster than any other empire because technology has accelerated inequality like no other human creation.
The debate is is not that difficult and as America moves down the list and Americans move rapidly towards the bottom of wealth inequality it is nice to remember that it is Ukraine citizens and its oligarchs who occupy the bottom.
It was Canada led by Governor of the Bank of Canada Mark Carney BA Harvard which avoided most of the 2008 meltdown.
It is Harvard's Steven Pinker who has all the data indicating how much better the world 's citizens are today than they have ever been.
I understand math, we can measure many things but one thing human cannot measure is the feelings we experience when we cross into America and know that for too many the fear and trepidation about the future is palpable.
I remember Paul Krugman in conversation with Tony Atkinson (founder of the economic school studying inequality) and Chrystia Freeland.
Paul Krugman is a great economist but I think more of him in 2020 than when he was just a great economist. You can't measure a sense of well being. Economics is much more than revenues and expenditures it is the way our society functions and the way our people feel.
I am tired of consoling my American friends and relations. In Quebec I get to listen to Piketty, Saez and Zucman in French and English.
America's wealth and power will not save it from a society that thinks its past is better than its future.
12
The discussion of a wealth tax is entertaining theater, but such a tax is most likely unconstitutional, and the prospects of getting a constitutional amendment passed to make it legal seem slim.
Moreover, there are much easier ways to raise taxes on the wealthy. The most obvious is to simply raise marginal income tax rates on higher earners. Then, you can eliminate the preferential treatment for dividend and long-term capital gain income. Then you can eliminate the automatic step-up in cost basis of inherited assets. Then you can lower the exclusion level for the estate tax.
But that "wealth tax" sounds oh so sexy!
5
Disclaimer: Although I have read Piketty's book on Capital, I have not yet read the works of Zucman and Saez.
Disclaimer 2: I am not an economist.
In fact, I am skeptical of many of the popular books on economics, particularly macroeconomics.
Macroeconomics tackles important but difficult questions. Macroeconomic models have limited predictive value. For example, they did not provide us with a warning of the 2008 Great Recession.
Moreover, macroeconomists wear two hats. On the one hand, they want us to believe that are involved in a dispassionate search for truth. On the other hand, they are often social advocates, selling their services to one or the other political party to provide ammunition for political debates.
There is the possibility that advocacy affects the search for truth, that economists might be tempted to discount the variables that might undercut the political positions they are prone to take.
Let's take a simple economic question. Why is the Dow so high? The Schiller CAPE ratio now stands at 30.91 compared to an average value of 15.21. That suggests that we should be facing a market drop which would wipe out half the value of US stocks.
Economists might say it's "irrational exuberance." But according to on-line blogs of investors, a significant market drop is expected if Sanders wins the nomination.
Sanders did not say, "We'll try a wealth tax." He said 8%.
That leaves the possibility that half the wealth disappears before being taxed.
5
"...the concentration of wealth at the very top and their outspokenness have vaulted the tax from a fringe idea in American politics to the center of a reinvigorated debate on taxing the rich."
I've been following public opinion polling on a wealth tax for over two decades and it has always enjoyed majority support, so how is it "a fringe idea"?
"They have also made Mr. Zucman and Mr. Saez the most visible, and polarizing, economists in the 2020 campaign."
The poles appear to be:
the public overwhelmingly in favor,
versus
a small slice of the public against (the real "fringe").
If most of the politicians weren't servile pawns of the rich, a wealth tax would've been enacted decades ago. This explains the apoplectic response of the establishment to Sanders' electoral success.
10
Billion-dollar views? Are the authors trying to imply that these economists are somehow hypocritical for working at a preeminent public institution that happens to have views of SF while promoting the need for a wealth tax?
I miss the copy desk.
4
If you tax the ultra rich a little more, they're lives won't change at all.
If you take that money and help the public good, you can change the lives of millions of people for the better.
12
Thank you for this opinion piece. It would be good to see exposition, then debate about the merits of various systems put forward. Claims of favoritism/being supported/supressed by billionaires/socialists are weak arguments. What are the systems and the ramifications of each. Let them stand on their own.
And not on Twitter. A long-format series on Youtube would be ok. Perhaps with charts and supporting data.
If we accept something this important based on sound bites, we are just going further down the rabbit hole.
5
Didn't see anything about angry economists.
1
Observe the remarkable capacity of the 1% to tolerate (or, maybe ignore) the suffering of other persons.
We, in the community of trained observers of the dense field of autism, did not initially believe Alexothymia was so widespread.
Time to rework the math on how many persons actually cultivate fear, hatred, anger and delusion.
May all manner of things be made right.
5
Too close to home at Harvard. That huge endowment might come into question....
2
What does it mean to pay your fair share? For Sanders, Warren, most Democrats and even many Republicans, it means taxing the wealthy. Oh, those despicable wealthy people! The ones who got into the toughest schools and worked 90 hours a week for years. The mantra is that we must punish them to have a just society. We need to take most of their wealth and give it to the "working class" so that they don't have to work so hard. Sanders says we should be like Sweden. He fails to mention that everyone (not just the wealthy) pays very high tax rates there. The US already has a very progressive income tax system. The myth that billionaires pay a lower tax rate than secretaries only relates to income from capital gains, which generally max out at around 20%.
3
We don't need a wealth tax. We simply need to eliminate tax loopholes. 10% flat tax on sales and income. Eliminate all loopholes. If you make or spend a buck you pay a dime. But that would eliminate jobs at the IRS and all the ancillary employment that goes with it it, and it would make sense so that'll never happen.
When corps like Amazon aren't paying a penny in taxes, and worse, fleecing the US taxpayers for $250 million bucks a year in subsidies a wealth tax is barking up the wrong tree.
9
@Halsy A VAT would be more practical for taxing Amazon. It would tax every part of the process, collected at the point of sale, throughout the process (not just the consumer sale.) No way to to get around it. Canada and other countries have this, Amazon can't "move" to Ireland to evade taxes. With a VAT it would be desirable to exclude things like food and medicine. We really need this, since Amazon makes use of our infrastructure for free.
5
Sadly, even Sanders wealth tax of raising $4 Trillion over 10 years is a mere pittance of the money needed just to fund universal healthcare. Currently, healthcare spending in the U.S. amounts to almost $4 trillion annually, and it is projected that we will spend $50 Trillion in healthcare over the next 10 years. And, remember, Sanders wealth tax will be spread across many more things than just healthcare.
I am for a wealth tax and a far more progressive tax system and closing all the loopholes leading to far more tax revenue. But, without bringing down the underlying costs of healthcare, housing and education we will not achieve affordability through taxation. Meaning, if the things we are trying to fund with increased tax revenue continue to have runaway cost structures like healthcare and education, thus making them still unaffordable, then what's the point?
5
Taxing wealth is a way of allocating the cost of running a country to those who most utilize its resources. More property means more benefit from police, judiciary and even military protections. In addition, more resource have greater impact on, and utilization of infrastructure. If you put things in storage, you pay by the amount stored. Wealth managers charge a fee based on assets invested -- not transactions. So taxing wealth can be considered a proxy for taxing the 'space' taken up in our economy. It is a difference in principle from taxing 'activity' and could better charge those using governmental resources based on the size of their impact rather than how much 'activity' these resources generate.
13
I'm all for increasing taxes on the rich, albeit moderately, but a wealth tax is another matter entirely.
We're going to tax the same money multiple times? Once, as it comes in, and year after year as it's held?
We're going to tax the IRS (sorry) with the extra responsibility of researching billionaires' assets, on top of their current responsibilities of checking their income?
And if a billionaire's wealth isn't liquid enough, we're going to force him to sell off some assets in order to pay the tax he owes on them?
None of this seems right to me.
I suspect most Americans would reconsider their support of a wealth tax once they've thought through these implications.
We might also want to ask economists from the European countries who've dropped their wealth taxes after giving them a try why they didn't work out.
16
@Sixofone I agree. This is just another level of regulations. The tax code is so full of loopholes now that computing the taxes requires a CPA. The better the CPA the less you pay. Lets start by eliminating corporate welfare, and not bailing out every mismanaged bank before creating another regulatory mess.
2
@Sixofone
Do you think that Bloomberg made his billions by saving a share of his income year after year?
2
@Sixofone First, property taxes, which towns have levied since colonial days, are wealth taxes.
And keep in mind that most of wealth is held in the form of equities, which aren't taxed until they are sold, or until the owner dies and conveys the stock to children. And since the Republicans have eliminated inheritance taxes, those equities are usually never taxed.
So most wealth of the wealthiest people is never taxed, let alone taxed "multiple times."
5
The criticisms of Saez and Zucman relate to the effect of their ideas on markets, whether the wealthy can be taxed and other possible downstream consequences. But until I read that their data are wrong, I will continue to think through their book, "The Triumph of Injustice."
So far, I've come to see taxation as a way of wealth redistribution; taxes can both giveth and taketh away. Tax rates for the wealthy have varied from as much as 90% in the 1940's to 28% after the Tax Reform Act of 1976. Graphs demonstrate the association of regressive/progressive tax policies on where our GDP is distributed, up or down. The degree of tax compliance and avoidance is not set in stone, but dependent on societal expectations.
The significance of the ideas presented by Saez and Zucman were first recognized by Warren and then several months later, by Sanders. As for influencing politics and fiscal policy, let's not forget it was the ideas of Milton Friedman that guided Reagan's and Thatcher's trickle down policies. So I see Saez and Zucman and the timely correction of Friedman's now discredited idea that wealth should remain a privilege for the very few.
15
Econ 101
There is a difference between wealth and income from wealth.
The Swedish model
Sweden eliminated the inheritance tax in 2005, the wealth tax in 2007 and taxes on residential property in 2008.
In Sweden you do not pay taxes on "wealth" per se, but when wealth produces income , than you do pay a large and progressive taxes on that income, much of which is transfered by transfer payments to the less well off
There is something to be said for the Swedish model. It encourages conservation , from forests to 17th century country homes.
In practice:
In practice, a wealth tax is nearly impossible to collect as fortunes can move with the click of a mouse in a global economy. A derivative effect of globalization is that wealth can move to where it is taxed least
The wealth tax, for that reason, was eliminated In France by Macron, the sole except for wealth that can NOT move .
Their villas at the French Rivera and town palaces in Paris
10
@Woof
Wealth--here in the form of capital-- can move freely, crossing borders does not make this migration illegal. Its flight from taxation is not illegal either. Yet other forms of wealth and property, like people's talents, labor and bodies, cannot move freely across borders. Not can they avoid taxation. The dice seem to be loaded.
6
Something to think about with how these new tax revenues would be dispersed. A test - you give $1000 each to 10 "working poor" families. 5 families use that money to buy groceries, a new car battery, maybe fix the broken steps on the porch. The remaining 5 families go buy a massive TV and Xbox.
Which families would you continue to help?
5
@Midwest Josh Hmmmm? So long as each family spends their money within the US economy on commodities produced in the US, continue helping all of them. The difference is whether the money is given to them or they earn it.
@Midwest Josh
Just came across an article that might interest you, here: https://thecorrespondent.com/283/poverty-isnt-a-lack-of-character-its-a-lack-of-cash/37442933638-a4773584?utm_source=pocket-newtab
It points to promising research on the corrosive effects of poverty on individuals and suggests that alleviating the stress of poverty can lead to better outcomes for individuals as well as society generally.
1
At a macro level, a wealth tax sounds great. In practice it seems like a nightmare. Who determines the value of assets, and how? Does the IRS look up the value of a billionaire's home on Zillow? Does it hire an assessor? How about a privately held company? Or a Picasso. These questions can only be solved with massive new additions to the tax code.
13
@David
Many of those items are insured. Use that value? Valuation of company based on tax records?
1
@David This is why it hasn't worked. You'd need an entire army of assessors to assess value on art, jewelry, cars, boats, antiques, etc. And it would have to be done every year.
4
@David
More than half of the new wealth created every year isn't really "new," nor is it earned. It's inherited.
Wind back the clock, close loopholes, levy large inheritances at a high rate, and cal it a wealth tax.
See? It can be done.
2
The term "wealth tax" seems counter productive. Arguing about whether the super rich should settle for solid gold apples and oranges rather than owning platinum or diamond ones does little to solve the problem. The money paid in minuscule tax increases is all from their surplus. And there's no guarantee the government would dedicate the additional revenues to paid leave, child care reimbursements or raises in minimum wages. "Why not Fair Tax Reform"?
The economy operates on different scales for the middle and lower classes. Earned wages--deferred or otherwise-- do not automatically add value the way compound interest does for money in the bank, or gambling on investments in the stock market. Paul Krugman and others explode the myth that tax breaks for the wealthy free up money to create new jobs. Anyway, the IRS relies on voluntary compliance and we have our doubts how well that works.
2
Serious economic discussion is carried out in scholarly journals, not on twitter.
There are problems with wealth taxes:
1. Some assets, such as private businesses, are hard to value.
2. The people who have enough wealth to tax can hire the best tax lawyers to avoid taxes. Legal ownership of assets can be moved off-shore, or concealed.
The deeper problem is cultural: top executives are paid ten times more (in comparison to average earnings) than they were 60 years ago. Tax policy has nothing to do with it (that's pre-tax). It results from the assumption on the part of the people deciding compensation that this is proper; it's not the free market clearing compensation, which would be a tiny fraction of that.
If you want to reduce inequality, go after the revaluing upon death. Inheritance taxes are the most effective way of reducing unearned inequality.
22
@Jonathan Katz
Well, it seems these two economists carry it in both fora: they have to be vetted by peers in academic journals and they can open that work to the public as it should. Unfortunately Twitter is a new media of widespread reach. Medical research is thankfully diffused to the public through the media (Twitter messages about sanitation procedures and best practices, say, in the midst of the Coronavirus would be most welcome). Why not disseminate and discuss other kinds of research that affect the public? This is what elsewhere is called to be a public intellectual too.
2
@Jonathan Katz
"If you want to reduce inequality, go after the revaluing upon death. Inheritance taxes are the most effective way of reducing unearned inequality."
Bingo. And just from a moral point of view, you avoid a lot of gray area with an inheritance tax.
I don't feel comfortable saying to someone very rich "you did not earn that." I feel EXTREMELY comfortable telling the child of a rich person "you did not earn that."
I believe that you ought to pay for what you get, and inheritance is definitionally not that.
5
@Jonathan Katz
“The perfect is the enemy of the good” seems apropos here. It is indisputably true that a wealth tax would not “work,” if by “work” one means “it will collect all of the tax that it should and there will be no creative workarounds, cheating, etc.”
There are no laws that are 100% effective. Not all drivers stay at or below the speed limit. Probably the compliance rate with posted speed limits is rather low. But, it would be silly to argue that because the compliance rate is low, we should just not bother with speed limits. Having a speed limit results in lower speeds than would be the case if we did not have speed limits. Having a wealth tax will raise more revenue than not having one.
What is also true that other forms of new taxes, such as a tax on investment transactions, would also raise revenue and should be considered as well.
5
The wealthy are very good at hiding the value of their wealth.
How will this work?
Getting taxed on income from investments, trades, etc. (no loopholes or deductions allowed) sounds like it would be more successful.
3
How secure and sustainable would the billionaires’ wealth be if there was no army, no police, no jail, no justice system, no functioning government, no roads and infrastructure, no education system to provide competency for these organizations, no social stability to avoid disturbances and revolts, etc.. etc..
Ok so don’t call it a wealth tax, call it a service fee.
43
The wealth tax, at least as proposed by Sen. Warren, is essentially a con job. Almost every country that has implemented such a tax has rescinded it; the home country (France) of these two guys repealed the tax in 2014 (if I recall the year correctly). It just doesn't work in practice.
Besides, there are better way to reduce inequality, such as removing the tax deductions and loopholes that benefit the rich, getting rid of carried interest, and eliminating the Social Security tax-cap, to mention a few. A wealth tax is something that produces much less revenue than estimated, and just makes it seem like something is being done to address economic inequality, even though precious little is.
34
@Danny Indeed it is difficult to get anything from someone who has gotten rich. In fact, IRS even here in US, does not try to audit very wealthy just because it is too costly to audit and then, if it turns out to be to be true, then go through the process of court system(from the testimony of IRS commissioner to congress). It is more or less the govt needs a pre-nup with entrepreneurs ;-) -- i.e., open their eyes to why they are setting up shop in US and make them sign on the dotted line soon after they drag themselves out of the rickety boat ...long before they start jetting around in personal planes!
2
@Danny
All of your ideas have merit. But. Try explaining nuanced tax and income balancing to the average voter in 25 words or less. I imagine that closing loopholes and subsidies would be the actions of a Dem president accompanied with fanfare.
These candidates know what's up - they're not dumb.
2
Why tax? Why not part of the shares from new companies which are promoted by govt? Ex: Amazon when it didn't have to pay sales tax or Tesla when it was getting federal and local tax credits?
3
Instead of trading the idea of unlimited American opportunity to be a millionaire/billionaire (get a good education, work hard, and you can do it) for the idea of "punishing" billionaires for their success, why not get at the roots of the financial success of most of them. They don't usually get rich making things; they get richer and richer making money on their money. "Them that has gets." As grandma would have said. Dig into the root causes of that dilemma and fix them; then let those who can do, and pay taxes on their gains proportionally.
3
@Pathfox Makes the dubious claim that there is "...unlimited American opportunity to be a millionaire/billionaire (get a good education, work hard, and you can do it)"
The fact is there are countless more people who get a good education and work hard who will never become a millionaire/billionaire than the lucky few who do.
In fact, the single greatest determining variable in who becomes wealthy is not education or hard work; The greatest factor, by far, is being born wealthy.
So, if you really support the "idea of unlimited American opportunity", then you must support a wealth tax.
3
@Celeste
My comment was a snide remark, Celeste. Sorry you didn't get the subtly. Did you not read the part about the rich getting richer by making money on their money? People who get rich making things create jobs - some even pay decent wages. We need to get at the sources of the sociological and economic issues, such as insufficient and even negligent education, not snipe at the comments of people who agree with us.
1
I am no economist, but isn't this really "tax restoration" ? It seems the fifties and sixties ,when tax rates were fair, that the common good of most people were considered an important part of life in this country. Union membership was at fifty-eight percent,Glass-Steagall was in place, and the salary ratios from executives to workers was not an obscene disparity. Granted, we had less bills to pay: Television was free, no internet bills,telephone service was relatively cheap. Isn't this approach just a "back to the future" common sense idea?
16
Always great to let people who never participated in creating jobs and wealth define how to spend it. Mike Bloomberg has a far more nuanced and informed view of how to set up the right incentives. We should have a system that encourages working, innovation and investment but prevent unproductive behaviors or wealth transfers between generations from creators to consumers. Wealth gets created through the building of great enterprises like Microsoft and FB (good) and also through bad tax policies (e.g. trillions in real estate value both created and passed generationally - depreciation, step up basis). Taxing wealth is a bad idea. Targeting things like real estate, bad estate tax policies is a good. These French theoriticians are wrong and destructive
6
@Chris
Microsoft and facebook have caused trillions of dollars of harm by foisting bad software on us (reducing productivity) and making people hate each other.
2
It's simply about being fair. Those who may make the most should pay their fair share. It's that simple not that hard to understand. We all must pay for the infrastructures and social structures , you know the parts of our society that allows everyone to have a chance at making, enjoying and being productive during this life. I find it hard to believe that in today's world knowing what we know about manifesting positive human behavior that there is still is mindset that believes in the more for me the better even though the costs are so great in regards to humans other species and our planet. If we don't wake up soon mother earth will make that decision for us.
3
@Keith Barkett
Unfortunately, "fair" means different things to different people. That's the entire problem.
7
@Keith Barkett - the wealthy already pay more than their fair share. Do they use the roads more than you? Do they use public schools more than you? Do they use armed services more than you? Obviously no. Around 45% of Americans pay no federal income tax. Do these folks use public services. Obviously yes.
3
@Tim Lewis As much as I would like to agree with that simple view it doesn't hold water. All that you mentioned is what is needed for the wealthy to make their wealth. Along with all the people who work to make the roads ,schools and keep them protected. The system has been made unfair for the last 30 to 40 years by those who can influence tax law. Trickle down does not work that is why so large a number does not pay taxes along with oh that's right behemoths Amazon and GE.
With all do respect we can work out a more reasonable tax plan. Winner take all is not the way.
4
I have heard that wealth taxes have not worked in other countries where implemented. Is that true? Please tell more .
1
@Diana
Yes you are correct. Elizabeth Warren's claims about what the wealth tax will pay for is wildly optimistic. But I have a more basic objection to this thing. The tax code is too complicated as it is, and the wealth tax is another added complication. Yes, billionaires should pay their fare share, but they should do it without all the loopholes provided by a complicated tax code. Simplify the tax code. Don't give the rich guys another way to cheat.
6
@Diana Yes it failed in Europe.
https://www.npr.org/2019/03/01/699261950/why-a-wealth-tax-didnt-work-in-europe
2
Even if Zucman and Saez' forecast of $4 trillion turned out to be $3 trillion, or $2 trillion dollars would still ultimately strengthen the middle class, shrink poverty, and nourish a more unified Democracy. If the criticisms are only of that prediction, based on their analysis of what the top 10th of 1 percent of Americans earns, than the fears of both economist, as well as the Democratic candidates running with a wealth tax on their platforms are ingenuine.
The definition of wealth is ruled by those who own it, but, as with any definition, they are strengthened by more Americans invested in its value and appreciation.
5
We already have a wealth tax - it's just been watered down to the point of uselessness. Its called the estate tax.
It provides a valid argument against the protests of the 1% that "they earned it". Fine - you earned it. In life keep it. Use it, build upon it and distribute it as you see fit. Be part of an progressive income tax structure that taxes the income that feeds your pile of wealth. Upon your death - you can pass along what would be "reasonable" (50 million? 100 million? 500 million?) tax free to you heirs. The rest reverts back to the society that helped you build that wealth through its support of infrastructure, education, research, national defense and legal system.
It most certainly would expand the opportunities of those not born with a silver spoon in their mouth by churning that wealth into the economy - and give impetus to the wellborn to take every advantage of that head start in life because the golden fortress on which it depends is not guaranteed.
16
The estate is specifically not a wealth tax or it would not have survived constitutional challenges. It is an excise tax, paid to facilitate the one time transfer of assets from one owner to another. It was very common in the colonies and familiar to the Founding Fathers. Though the rate was a lot lower, they made it very clear that the Federal Government could have transactional excise taxes, not property taxes. Of course, per the Tenth Amendment, states can tax what they want.
3
How can Larry Summers possibly think that the ultra-wealthy do not have a big role in politics. Has he not read Jane Mayer's book Dark Money? If not the educator needs to read that book carefully and educate himself.
6
Taxing wealth has been tried and failed in countries such as France. How do you calculate the value of art? antiques? homes? Privately held shares in companies?
What happens when non-cash assets (art, shares) MUST be turned into cash to pay taxes? (The value of related assets MUST fall). Such a tax would weigh on the stock market (401ks anyone?) as shares are unloaded to pay the IRS.
There are far, far better ways to tax the rich (eliminate the difference between earned and unearned income in the tax rates???)
6
Read Piketty's book and the recent missive. My question for the naysayers, what is your option? Larry Summers shilled for the banksters back in 08/09, then had to beg his way back into polite society with a big mea culpa. We are at the inflection point. If nothing is done serfdom is the next step.
1
@Paul - You have this backwards. Serfdom is when your labor, your property, your wealth is taken from you without compensation.
1
“If we have the wealth tax data, we will see who is right,” Mr. Saez said. “If we’re wrong, fine. If it turns out there is no wealth concentration in the United States, we don’t need a wealth tax.”
Personally, I'm in favor of a wealth tax. It could really be put to good use, but advocating for such a measure when the evidence is inconclusive sounds irresponsible.
2
@cb The rich will ensure that the evidence is always inconclusive.
1
Perhaps we should impose a tax on accumulated wealth as well as raise the rates on annual income—and reinstate the full estate tax. Restore the notion that those receiving the greatest rewards should shoulder more of the cost of the society that grants them.
We could conduct a real-world experiment in American happiness, a founding precept of America. Are we the land that really believes in "unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness” with the emphasis on the last? What offers us national happiness? Data suggest that a more equal society in economic terms is the key.
The UN World Happiness Report for 2019 listed every country in a happiness ranking based on real GDP per capita, social support, healthy life expectancy, freedom to make life choices, generosity, and perceptions of corruption.
Top three: Finland, Denmark, Norway
The USA came in 19th, edging out Czechia. Why are we not the happiest nation? Perhaps it’s because we have too many billionaires—we’re number one on that index with 559. That is only one indicator, Mr. Saez and Mr. Zucman cite many more.
The real question is, would we rather have the most billionaires or have the rest of us be happy?
4
@David Potenziani - so the road to happiness is to confiscate the property of wealthy people?
2
@Tim Lewis Actually, taxing wealth and high incomes are a recognition that those who have achieved high status did not start at the same place. If everyone started life with the same innate abilities, circumstances, and opportunities it might be defensible to complain about such taxes because the wealthy would have earned their fortunes. But the growing inequality of our society puts an increasing proportion of our people at a disadvantage because of relative lack of nutrition, health care, clean air and water, and so on.
Moreover, those who have achieved great wealth did so by relying on laws, public resources, and regulated industries to provide economical and predictable services they need: an educated workforce, good roads, the Internet, and a host of other benefits of government.
No one gets rich on their own. They all owe the rest of society a profound debt. It’s time to pay up.
1
@David Potenziani Per capita, Norway has more billionaires than the US, so perhaps billionaires and happiness aren't as mutually exclusive as you seem to think.
Piketty's book 'Capital in the Twenty-First Century' provides extensive research and support for a wealth tax. It is definitely needed, but it doesn't really matter. Wealthy people may be able to avoid the consequences of a deteriorating planet for a little longer than most of us, but this is the MOST IMPORTANT ISSUE NOW.
1
it is a well known fact that consumer consumption is the largest component of GDP. That cannot be in dispute. What is less certain but highly probable is that wealth transfers from the ultra wealthy to the vastly poor will at the very least shift consumption from likely unnecessary items to basic non discretionary expenses such as food, health care, child care, senior care, transportation and education. The providers of basic essential services are mostly in lower to middle wealth segments. Increased opportunities here could increase wages and supply, again shifting economics away from items the wealthy tend to spend on - including luxury items. If you take this to a conclusion - the real questions to ask are hoe will human behavior change with normalization. Will human attachment to money and power change? Will investment in high risk often non perpetuating businesses be reduced? Will reduces opportunity lead to less incentive to try? Some would say yes. But I doubt it. Would Bezos have built Amazon for 10% of what he had today? Gates? I think the answer is yes. It isn’t money these people really seek, its influence and legacy. Same with many people, although to a lesser degree perhaps. W/o some sort of wealth redistribution, the process we see today will only become even more exasperated. Fundamentally we are headed to person-nation-states. And that is incredibly dangerous to our species. It is the opposite of the wisdom of the crowds.
10
I wish these economists would take the next step in this research and show how this current path is unsustainable. Please explain that continued deficit spending during both depressed and growth cycles will continue to erode the value of currency. How do we recover from the next great recession? Interest rates are already kept unreasonably low (1.5 - 1.75%) and we currently print Trillion's of dollars of Treasury Securities in order to pay for our basic budgetary items. So in the next recession, we can't lower interest rates do we just print 2 Trillion $ of Securities? If we do, rates will need to go up and if rates go up the $ will be almost worthless. This is an unsustainable path, and if those in the top .1% felt that the march on Wall Street was bad in 2009, wait for what happens when there isn't a bailout by the Fed.
7
Such a wealth tax would be controversial politically, as other comments reveal, and economically, as the article indicates. Other cat-skinning options include raising the corporate income tax and closing its gaping options, lowering the estate tax limits and disallowing many trust-related tax dodges, re-defining -downward - the definition of what constitutes a small business, providing the IRS the resources needed to audit the complicated tax returns of the wealthy, and so on. Such measures would be less controversial and less speculative.
2
The Federal Reserve reported that the bottom 50% of Americans received 4% of the $16 trillion household net worth increase under Trump, as of Q3 2019. This group has $1.7 trillion of the U.S. household net worth of about $107 trillion, while the top 10% have $75 trillion.
Other data indicates the top 1% own about 40% of the wealth, versus 25% pre-Reagan.
A wealth tax seems like an obvious solution, and is deservedly popular across both parties.
30
@David Doney
At same time reverse in part or totally tax decrease give away to corporations given in 2017 and there will likely be enough money to fund early education and childcare programs for children, Universal Health Insurance for all
Americans, allow refinancing of student loan debt to current low interest rates, feed the poor and the hungry, jobs training programs, and more.
4
A wealth tax goes to the heart of inequality. Income can be manipulated or even non-existent on paper, but actual wealth is harder to hide. A modest 1 or 2% wealth tax would do wonders for restoring public faith in Capitalism, improving the general quality of life for most Americans, and restoring opportunity for those not born into wealth. The current 40-year trend of concentrating wealth in fewer families while providing enhanced citizenship to the wealthy (via Citizens United) is a toxic combination that no capitalist democracy can sustain for long.
70
@Purple Patriot It would have to be smaller though. Don't forget that wealth taxes compound over time. This year you pay 1%, next year you pay again 1% on what's left, and so on. The longer you hold assets or investments, the more they are penalised. Not sure the incentives are very good.
1
The most common set of fees charged by hedge funds is 2% of assets and 20% of gains. Capital gains taxes in the US are 20%, and the proposed wealth tax is 2% of assets over $50M. This is not confiscatory - this is what wealthy people already pay voluntarily.
I think that the Federal Government provides services worth as much as the typical hedge fund.
48
@Robert Stadler Just a couple of points here. You can take your money out of a hedge fund if the post-expenses return doesn't meet your expectations. Second, not all assets provide an annual cash return, which would necessitate selling some assets to pay the tax.
3
In other words: double taxation. If the ultra-wealthy paid an appropriate income tax to begin with, especially on investment income, there would be no need to tax their property, which would amount to double-taxation, which basically only encourages people to off-shore their wealth even more. So why don't we first try closing the loopholes and increasing the tax rate on investment income first before we start going after their assets.
51
@Ed
Because we don't fund political campaigns. They do.
1
@Ed
Because the horse has already left the barn....and bought most of the farm's land.
5
@Ed Aren't sales taxes and property taxes "double taxation" in the sense you are talking about? Are you against those?
5
It took 2 people to write this article??
These guys are not onto anything new, taxing wealth is an age-old concept. No need to present this as novelty. The resistance to increasing taxation of wealth is also age-old: those folks do want to.
I refer you to the tax rates if the 1950s. Economically we did pretty well. But back then Americans also saw themselves as all in it together as neighbors. Not so much now.
85
@Matthew,
There was also a 70% income tax for the wealthiest few, and a substantial estate tax that the founders of this country understood to be essential to avoid the emergence of a permanent “aristocratic class” whose extreme wealth was assured with or without work. That is no longer the situation in the US and the destructive effects are very clear.
42
@Matthew Age old? You said it! The Koran prescribes a wealth tax.
Why is it necessary to define the policy idea as liberal or conservative? Can’t we just talk/report about it without first judging it? Would love to see the NYT stop playing into the sides fray. I can only imagine it’s what their analytics show sells.
89
@Kyle,
Relieving the rich of tax obligations has been the primary mission of the Republican Party and many who call themselves Conservatives in the US. A wealth tax is anathema to those Conservatives, and something close to a panacea for Liberals. Hence the labels.
4
@Kyle Very well said.
The Sixteenth Amendment to the Constitution in 1909 was necessary for the income tax. How will a wealth tax fare in our Supreme Court? Wealth inequality can be moderated by treating all forms of income at the same rates and increasing the rates at the top. Wealth inequality will be democratically countered by equality of opportunity.
16
@Manninian
if an "estate" tax (inheritance tax) and a property tax (investments are property?) are constitutional, why not a "wealth" tax?
If property cannot be taken in eminent domain without just compensation, how can a wealth tax be defended as constitutional? I understand the utility in semantics. Eminent domain and taxation are different. Is there anything more substantial to be said here? I think not.
7
@david lange asks:
"If property cannot be taken in eminent domain without just compensation, how can a wealth tax be defended as constitutional?"
Well, my middle class family (total household income around $100k) already pays a wealth tax of over $12,000 a year on the 'wealth' we have in our home.*
Is it your contention that State, County and Local wealth taxes are constitutional whereas a Federal wealth tax would not be, based on the 'takings' clause of the 5th Amendment?
That argument does not hold water.
State, County and Local governments are certainly constrained by the US Constitution from taking property "in eminent domain without just compensation", yet their wealth (property) taxes have never been deemed unconstitutional.
____________________________
* We are actually paying the taxes on wealth we do not even have. Our property taxes are calculated on the value of the property, even though with decades to go on our mortgage we only have a fraction of that value in actual wealth, IE: equity.
69
The states as sovereign entities have no constraints on taxation except those items specifically barred to them by the Constitution. The constitutional restrictions on direct taxes only apply at the Federal level. No constitutional bars exist for states to tax assets. States could enact wealth taxes without any problem.
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The constitutional arguments against a wealth tax are not around taking. The Constitution allows states within their sovereign powers to tax property and court cases have upheld those rights. The Constitution has a strict bar against direct taxes, outside a deliberately unworkable process, against people with the specific exception provided only for income taxes in the Sixteenth Amendment. That amendment also provides a very specific definition of income that purposely excludes assets. Federal estate taxes are not wealth taxes. They are excise taxes, assessed to facilitate the one time transfer of property from one owner to another. They have existed since colonial times and are not an exception around the bar in the Constitution.
These economists do not specifically say a wealth tax is constitutional. They simply think it is a good idea. They leave the tortured legal reasoning to another pair of lawyers in Senator Warren’s entourage. That legal reasoning actually includes the idea that the Sixteenth Amendment was a waste of time. Congress and three quarters of the states wasted years of effort simply because they were not as smart as those two law professors. Congress, to them, can tax anything it desires. I believe Madison et al would not have agreed.
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