Massachusetts Sen. Elizabeth Warren’s proposal to tax the wealth of the country’s super-rich has met with elation from the political left, which has long pressed Democrats for more ambitious plans to curb economic inequality.
“I still think guillotines might be more efficient, but a wealth tax is a decent alternative,” deadpanned Alex Lawson, executive director of the nonprofit Social Security Works, who emphasized that he was joking.
“It’s a very exciting and interesting idea in terms of how we talk about wealth inequality,” said Corbin Trent, a spokesman for Rep. Alexandria Ocasio-Cortez (D-N.Y.), a dues-paying member of the Democratic Socialists of America who has vocally argued for higher taxation on the rich.
Warren, who hopes to secure the Democratic nomination for president, announced Thursday that she would levy a 2 percent tax on assets over $50 million and a 3 percent tax on assets over $1 billion. Ocasio-Cortez shook up the national tax debate weeks ago with her call, in an interview on CBS’ “60 Minutes,” to subject income over $10 million to a 70 percent marginal tax rate.
In the “60 Minutes” interview, Ocasio-Cortez referred to earnings above the $10 million threshold as the “tippy-top” ― language Warren borrowed when promoting her own plan on Twitter.
Now Ocasio-Cortez’s grassroots allies, including the group Justice Democrats, which played a pivotal role in Ocasio-Cortez’s victory in her June primary, are praising Warren’s addition to the tax debate as the Massachusetts senator’s presidential campaign ramps up. (Justice Democrats has not yet endorsed in the race.)
“The wealth tax is exactly the kind of populist policy America needs as we face systemic crises around climate change, inequality, and structural racism,” said Waleed Shahid, a spokesman for Justice Democrats.
The Progressive Change Campaign Committee, which endorsed Warren’s presidential candidacy almost the moment she announced it on Dec. 31, also gushed about the wealth tax.
“A wealth tax on the richest heirs, heiresses, mega-millionaires, and billionaires would create trillions of dollars that could be used on priorities like expanding Medicare and Social Security benefits, letting students graduate public college without debt, free child care, and creating millions of jobs through a Green New Deal,” said Stephanie Taylor, a co-founder of the PCCC.
I’m glad that Elizabeth Warren is stepping up to the plate. Winnie Wong, co-founder, People for Bernie Sanders
Warren’s plan, developed by the Berkeley economists Emmanuel Saez and Gabriel Zucman, is projected to raise $2.75 trillion in revenue from just 75,000 families over a 10-year period if implemented. In their analysis, Zucman and Saez assume that wealthy households will respond to the changes by reducing their taxable net worth by about 15 percent.
Perhaps more importantly, Warren’s plan aims to narrow economic inequality by limiting the accumulation of concentrated wealth at the “tippy-top” of the earnings spectrum.
In an email to HuffPost, Zucman described the tax as “the right answer to the dramatic increase in inequality ― the defining challenge of our time.”
A key innovation of the wealth tax is its extension beyond the income of wealthy individuals, whether in wages or investments, to the assets they accumulate over time.
Saez and fellow French economist Thomas Piketty conducted the formative research demonstrating that the accumulation of asset wealth plays a significantly greater role than annual income in the concentration of money in the hands of a few.
In Piketty’s best-selling book Capital in the Twenty-First Century, he entertains the idea of imposing a 1 percent tax on net worths of $1.3 to $6.5 million, and a 2 percent tax on those of $6.5 million or more.
Piketty told HuffPost that Warren’s proposed wealth tax would “not only help curb inequality and ultimately promote growth in the U.S., but also have a major impact all around the world.”
Warren’s plan is not entirely unprecedented in recent U.S. politics. Sen. Bernie Sanders (I-Vt.) listed a 1 percent tax on household wealth above $21 million as one of several potential financing options for the “Medicare for all” legislation he rolled out in September 2017.
Sanders’ office declined to comment on Warren’s proposal. (Sanders is reportedly still mulling a 2020 presidential bid.)
Winnie Wong, a co-founder of the grassroots group People for Bernie Sanders, offered qualified praise for the proposal.
“I’m glad that Elizabeth Warren is stepping up to the plate. It’s good for the national narrative, but she’s following in the footsteps of Bernie Sanders and [Ocasio-Cortez],” she said.
Progressive economists have mostly applauded Warren’s wealth tax. In an op-ed in The Washington Post, former Obama administration economist Jared Bernstein called it a “smart idea whose time has come.”
Stephanie Kelton, a Stony Brook University economist who advised Sanders’ 2016 presidential run, lamented merely that the wealth tax should be larger in the interest of curbing billionaires’ wealth even more. She noted that when Donald Trump flirted with a third-party presidential run in 1999, he proposed a one-time wealth tax of 14.25 percent.
“The only way this works is if the tax rate is greater than the rate of asset growth,” Kelton said, though she acknowledged that “coming in with a number that’s a bit more modest may feel a bit safer.”
Dan Alpert, a fellow at the liberal Century Foundation, said that “every progressive bone” in his body nudged him toward supporting the wealth tax, but he was concerned about its effects on investment and access to credit. He instead supports subjecting capital gains ― that is, profit made on the sale of a financial asset ― to the higher rates in effect for traditional income.
Meanwhile, Alpert’s objections to the wealth tax pale in comparison to those of Republicans and their amplifiers in the conservative media.
“To fit in with the Democrats’ ever-increasing race to the left, Elizabeth Warren has proposed yet another tax increase ― one that is potentially unconstitutional ― to pay for her wildly expensive policy agenda,” said RNC spokesperson Mandi Merritt. “When are Democrats going to learn, raising taxes and expanding government is never the answer?”
On Fox News’ morning talk show “Fox and Friends,” the co-hosts suggested Friday that Warren’s tax ― and other proposals to redistribute wealth promoted by New York City Mayor Bill de Blasio (D) on Thursday ― risk pushing the United States toward the economic and social disarray of Venezuela, which is run by a nominally socialist authoritarian government.
After briefly describing Warren’s proposal, the Fox News co-hosts played a clip of de Blasio speaking to the U.S. Conference of Mayors on Thursday, where he said there is “plenty of money in the world,” but “it’s just in the wrong hands.”
Ed Henry, one of the co-hosts, compared the policies backed by de Blasio, and by extension Warren, to those enacted in Venezuela, where the government nationalized entire industries.
“What he’s saying is, ‘The money’s in the wrong hands, so we’re gonna take it out of those hands and we’re gonna redistribute it,’ which is what they tried to do in Venezuela ― basically,” Henry said.
This article has been updated with comments from Piketty.