Like the Coronavirus pandemic it wreaks havoc on the economy and disproportionately affects low-income Americans, the super-rich have seen their wealth increase. Massachusetts Sen. Elizabeth Warren, who has long been calling for a wealth tax, unveiled legislation Monday that would tax super-rich for their net worth.
The proposal, called the Ultra-Millionaire Tax Act and published with Congresswoman Pramila Jayapal of Washington and Rep. Brendan Boyle of Pennsylvania, would impose a 2% annual tax on households and trust between $ 50 million and $ 1 billion. It would also mean an annual surcharge of 1% on families and trusts in excess of $ 1 billion. Lawmakers say the measure would level the playing field and reduce the racial wealth gap.
“It’s a long-needed wealth tax. We need it to generate more revenue and create more opportunities in the United States,” Warren said. “But it’s a wealth tax we need particularly because of the changes in this country under the pandemic. We’ve seen multibillion-dollar wealth in America increase by more than a trillion dollars over the last year.”
Warren has been a vocal advocate of a wealth tax for some time, making it one of his signature platforms in the campaign campaign when he ran for president in 2020. “Two cents “, referring to the 2-cent tax that an ultra-rich taxpayer would pay ten for every dollar, even adorned the campaign merchandise and was sung at rallies. The bill is now one of his first moves as a new member of the Senate Finance Committee.
According to an analysis by economists at the University of California-Berkeley, some 100,000 American families would be responsible for the ultra-millionaire tax. They also estimated that it would generate an estimated $ 3 trillion in revenue in ten years without raising taxes on 99.95% of U.S. households, which have a net worth of less than $ 50 million.
“Today the richest 1% owns 75% of the nation’s wealth and the richest 0.1% (i.e., zero percent), owns more than 18% of American wealth,” said Jayapal. “Then compare it to the entire bottom half of Americans who only own 1.5% of the wealth.” Jayapal also pointed to the racial wealth gap with white families with an average wealth that is 14 times that of black families and eight times more than Hispanic families.
The group of lawmakers argue that the wealth tax should be at the top of the list to help pay for the plans, as the United States is emerging from the economic crisis of the coronavirus pandemic with funds earmarked for child care and early education, infrastructure and other priorities.
“I recognize that at some point we will have to resort to revenue. Well, here’s a fair way to do it,” Boyle said, acknowledging COVID’s recent spending on relief. “This is a much more fantastic way to make a living than to tax the middle class and the poor people of this country.”
This is happening as was the US $ 1.9 trillion rescue plan happened in the House early Saturday and goes to the Senate. The White House has said it would be the first piece of legislation and would be followed by another with investments in long-term efforts, such as infrastructure.
However, President Joe Biden did not support a wealth tax while running for office and his administration has already indicated that they are considering other options to pay for the costs of future investments. Last month, Treasury Secretary Janet Yellen said a wealth tax has “very difficult implementation issues.” On several occasions, she and other Biden administration officials have discussed the tax review and corporate tax loopholes.
At the same time, passing a wealth tax would be difficult in the Senate. The ultra-millionaire tax law is sponsored by Democratic Senators Bernie Sanders, Sheldon Whitehouse, Jeff Merkley, Kirsten Gillibrand, Brian Schatz, Ed Markey and Mazie Hirono. But with the 50-50 chamber split following party lines, getting a majority, let alone 60 votes, could be a challenge. Warren has called for the filibuster to be dismissed, claiming that the procedural mechanism for delaying or blocking a vote gives veto power to Senate minority leader Mitch McConnell.
The number of countries with wealth taxes has fallen in the last 30 years. In 1990, 12 European countries had wealth taxes, but in 2018 that number dropped to three. Economists point out that there are multiple challenges associated with estimating income that would be generated in part by a wealth tax due to the valuation of assets.
“In the realm of equity, in the realm of the tax burden, it can be very attractive. A lot of money that affects relatively few taxpayers, all of them at the forefront of wealth distribution,” said Janet Holtzblatt, principal member of the Urban-Brookings Fiscal Policy Center. “But it can have drip effects in a negative way if it harms the economy, if it harms investment and it may not have as strong an effect as supporters want because of the ways to avoid and evade a tax.”
The Ultra-Millionaire Taxes Act, as proposed, includes several provisions to block tax evasion, including a $ 100 million investment in domestic revenue service, a minimum audit rate of 30% for taxpayers subject to the tax and 40% of the so-called exit tax worth more than US $ 50 million who renounce their citizenship in an attempt to get out of paying the tax.
“For any good tax, you want it to be able to function without having these super strict measures to avoid avoidance,” said Tax Foundation economist Daniel Bunn. “If you need that kind of penalty to avoid avoidance, I’d say you’re probably designing the wrong tax to begin with.”
Bunn also points out that a wealth tax could cause foreign investors to replace self-produced billionaires as capital owners.
“If you reduce the return on wealth for U.S. citizens and you don’t have something similar for people with high net worth investing in the United States, you will end up changing the ownership structure of U.S. assets,” he said. dir Bunn. therefore, instead of having many U.S. assets (whether housing or equity or other assets) as U.S. citizens, you essentially create a preference for foreign ownership through the tax code. “
But the idea of a wealth tax in general has broad support in the United States. A Reuters / Ipsos poll last year found that nearly two-thirds of Americans strongly or somewhat agree on the fact that the richest should contribute more.