Why does Elizabeth Warren want to hit America’s 75,000 richest families with a $3 trillion wealth tax? Ostensibly to pay for stuff. Stuff that would supposedly create “an economy that works for everyone,” as she puts it. And in the presidential candidate’s view, that expensive effort means pricey new federal programs such as universal childcare and student loan debt relief. All paid for through her annual 2 percent levy on fortunes above $50 million, plus an extra 1 percent on wealth excess of $1 billion.
Those tax rates may seem modest. After all, the top personal income tax rate is 37 percent and progressives now routinely raise the prospect in increasing it to 50 percent or even much higher. But this would hardly be a minor tax of merely symbolic importance. A calculation by Emmanuel Saez and Gabriel Zucman — the University of California, Berkeley economists who helped devise Warren’s plan — shows the 15 richest Americans would see a 54 percent reduction in their net worth, to $434 billion from just under $1 trillion if the scheme had been in place since 1982. (A more radical version contemplated by the advisers, a 10 percent tax on billionaires, would reduce that amassed wealth by nearly 90 percent.) And overall under the plan, the total share of national wealth owned by the 400 richest Americans would be reduced to about 2 percent from 3.5 percent currently.
One wonders how many American would be happier, really, in a world where Jeff Bezos was worth $24 billion instead of $113 billion. Activists who view the existence of any billionaires at all as a public policy failure would still be miserable. But regular Americans, less obsessed with the fortunes of the rich and famous, might share their mood, though for different reasons. They might be poorer.
It’s hardly novel economics to suggest that a wealth tax would reduce savings by those hit with the tax, leading to less investment, productivity growth, and wage growth than otherwise. Less risk taking, too. Saez and Zucman concede that a wealth tax “would reduce the financial payoff to extreme cases of business success” but disputes there would be any loss of “socially valuable innovation.” As they see it, a wealth tax would really only hurt wealthy owners who have already built businesses and are worried merely about “protect[ing] their dominant positions by fighting new competition.” In …read more
Source:: The Week – Politics