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One of Elizabeth Warren’s most discussed proposals in recent weeks has been her push for a tax on wealth above a certain threshold.
It’s no secret that the class divide in America has been growing greater and greater in recent years. The share of the total wealth controlled by the top 0.1% of Americans has risen from 7% in the 1970s to 20% in 2016, while the bottom 90% of Americans have gone from controlling 35% of the nation’s wealth to 25%. The top 1% of Americans have gained $21 trillion in the past 30 years, while the bottom 50% have lost $900 billion.
This enormous segregation of wealth has made it harder and harder for Americans to succeed. While the stock market reaches great highs, many Americans struggle to work multiple jobs to make ends meet due to the increasing concentration of actionable wealth in the hands of a smaller and smaller group of people.
This is bad for the economy, even from a capitalist perspective. The fewer people who have actionable wealth, the fewer people are able to stimulate the economy. The ultra-wealthy, contrary to popular rhetoric, are not a boon to the general economy, because they become wealth sinks by absorbing money without using it. This isn’t to say that the ultra-rich live austere lives; on the contrary. But, the amounts of money made by the top 1% are so large that they cannot hope to spend it all, and indeed have no desire to. They are able to live extravagantly while still constantly increasing their total wealth enormously, to the great detriment of our society.
Because of this problem, a wealth tax has been proposed by several Democratic candidates. Warren’s tax has become the face of the idea, despite being the more lenient of the main plans proposed. Her wealth tax plan consists of a 2% tax on every dollar owned above $50 million, and a 6% tax on every dollar above $1 billion. This is a very small amount in the grand scheme of things but would net the government roughly $3.75 trillion over 10 years.
Warren’s taxes are not radical in the objective scheme of things. Americans already pay tax on their assets in the form of property tax, and the ultra-rich pay estate tax upon their death. This proposed wealth tax will not deprive the ultra-rich of their status or wealth, and it will be used to improve the lives of Americans who need it. If anything, it doesn’t go far enough.Independent – Daniil Ivanov
Elizabeth Warren’s proposed wealth tax is a scary proposition that reflects the extremes that politics has come to. In an effort to stand out in a crowded field of candidates, Warren’s 2% tax on assets over $50 million and 6% tax for assets over one billion dollars creates a yearly penalty for mass accumulation of wealth.
On the surface, the tax is a logical socialist solution to funding trillions of dollars of spending that Warren plans under her presidency, and if somebody has billions of dollars in assets they would most likely not feel many effects from such a tax.
It’s humorous to envision billionaires as Scrooge McDuck characters with vaults of gold that they swim in, but actual billionaires carry little cash and hold their wealth in stocks, bonds and physical assets. This is an issue if Warren plans to take 6% of that every year.
The first question is evaluating the worth of an asset. An art collection worth billions of dollars may only be a few hundred dollars in canvases and paint but has an arbitrarily high value. A yacht or a jet or a sports car, on the other hand, would all depreciate over time. This all means that the IRS—which has lost funding and employees over the past decade—would need a large team of appraisers to investigate every American who has $50 million in assets.
The next issue that arises is tens of thousands of mega millionaires and billionaires selling their stocks and hosting extravagant yard sales all at once to be able to pay their taxes. Since every wealthy American will be in the same position, Warren’s plan would not only enable but require foreign investors to buy up shares of American companies and our second-hand luxuries. Essentially, China, Russia and Saudi Arabia would have to fund Warren’s mass socialization of the country.
Even if the immense clerical labor that it would take to carry out Warren’s plan was accepted alongside the selling of our country to foreign powers, there comes the sheer amount of money that Warren considers a “fair share.” 2016 IRS data showed that the top 5% of earners made 35.2% of earned income but paid 52.3% of income tax. The top 25% paid 85.97% of taxes.
Considering the barrage of ways that wealthier Americans can have their income involuntarily donated to a massive inefficient bureaucratic system, it comes as a surprise that candidates like Warren and Bernie Sanders are now trying to attack the savings accounts and physical assets of Americans.
Instead, much less extreme options are available such as government spending reduction; taxes on trillion dollar companies and value-added taxes like Andrew Yang proposes; or, as Donald Trump proposed in 1999 in order to cut the national debt, a one-time wealth tax.Conservative – Mark Pothen
There recently has seemed to be a push by those on the hard left to ostracize individuals who have found success and become wealthy in doing so. The logic goes that because there is inequality between those who have accrued more wealth and those who have accrued less, the people who have accrued more wealth have somehow disenfranchised those on the lower end of the income spectrum. Elizabeth Warren’s proposed wealth tax stems from this same mentality.
First, the distinction between a wealth tax and other taxes such as an income tax needs to be made. An income tax, for example, is calculated based on the amount of income that an individual has taken in over the course of a year. For a wealth tax however, the government would have to assess the value of every asset an individual owns every year, including the shirt on his or her back, and compel them to hand over 2% or 6% of that value.
In terms of feasibility, this entire endeavor would be a disaster. Reevaluating the monetary value of every asset owned by an ultra-wealthy individual, especially assets like art and property where there is tremendous variability in what the value of those assets could actually be, would require a countless amount of IRS resources.
This wealth tax could especially have dire ramifications on the business sector given that business owners may have to liquidate parts of their business in order to pay such a tax. For example, if a business owner is the sole proprietor of a business that is valued at 50 million dollars, he will now have to account for one million dollars in taxed wealth which may be more than the entire yearly salary that the owner takes home from the business.
Warren and other proponents of her wealth tax don’t seem to understand that when you begin to confiscate wealth, wealthy individuals’ behavior is affected and because of that, there are adverse effects on investment and economic growth. The root premise that the top 1% is not paying their fair share is ludicrous considering that IRS data shows that they are currently paying 40% of total tax revenue while concurrently earning 20% of the United States’ income.
There is a reason that similar policies have been attempted in European countries and resulted in failure: being a billionaire means that you can pack up and leave on a whim. If Elizabeth Warren is allowed to impose her wealth tax, individuals who own companies that employ thousands will decide to take their businesses to countries that are more open to free markets, which would be severely detrimental for the American economy.