Friday, February 1, 2019
Time: Elizabeth Warren’s Wealth Tax on the Super-Rich Is the Wrong Solution to the Right Problem, by Daniel Hemel (Chicago):
Senator Elizabeth Warren’s proposal for a 2% annual wealth tax on households with a net worth of $50 million or more has drawn praise from progressives who view it as a necessary response to rising economic inequality and jeers from conservatives who see it as confiscatory and unconstitutional. But commentators on both ends of the ideological spectrum seem to agree on one thing: Warren’s idea is “radical.”
In fact, a 2% annual wealth tax isn’t all that dissimilar — at least in theory — to something more familiar and less controversial: an income tax. The major differences are administrative and legal. A wealth tax is more difficult to enforce, and it’s more likely to be struck down by the courts. All of which raises the question: Why did Warren, the senior Democratic senator from Massachusetts and now a candidate for her party’s 2020 presidential nod, propose a new wealth tax rather than an improved income tax that would accomplish much the same result?
We’ll get to that question at the end. But first, let’s set aside the rhetoric and look at the arithmetic. ...
Ultimately, Warren is right that we need to reform our tax system so that the very rich pay a larger share. That includes not only households above the $50 million threshold, but also not-quite-as-wealthy multimillionaires like Warren herself, whose net worth was estimated by CNN in 2015 to be nearly $9 million. Yet we do not need a wealth tax in order to tax the wealthy, and we can accomplish that objective more effectively by improving upon the system we already have. “Fix the income tax” might not sound radical. But it would likely do more to reduce the wealth gap than Warren’s splashier plan.