Posted on 02/04/2021 2:32:51 PM PST by george76
Economists interviewed by FEE warn that Senator Warren's new proposal would backfire horribly...
Senator Elizabeth Warren made a “wealth tax” on net worth one of the defining proposals of her unsuccessful 2020 presidential campaign. Now, the staunch progressive is using her new perch on the Senate Finance Committee to introduce a wealth tax at long last.
Warren’s wealth tax would affect families with assets of $50 million and greater, Fox Business reports. It would start at a 2 percent annual tax, but add an additional 3 or 6 percent levy on those with assets totaling $1 billion and more.
Other progressive lawmakers like Senator Bernie Sanders have long supported similar proposals, and it is projected that Warren’s wealth tax would apply to roughly 75,000 American families.
At first glance, average Americans might understandably think this tax only marginally hurts the wealthy, not anyone else, and shrug their shoulders. But top economists exclusively interviewed by FEE warn that this proposal is deeply misguided and counterproductive.
For one, taxing something discourages it, economists said, the same way cigarette or carbon taxes are designed to discourage smoking and CO2 emissions.
“There will be less of whatever is taxed,” Texas Public Policy Foundation chief economist Vance Ginn explained, calling a wealth tax a “terrible” idea. “Taxing wealth is just another flawed redistribution approach masked as good tax policy as it will destroy wealth creation and the incentives to save and invest, which are fundamental to human flourishing.”
Of course, voters might imagine a levy only being applied to the vast wealth billionaires have tucked away, hoarded and not being utilized for societal gain. Cato Institute economist Chris Edwards told me that’s not how wealth works.
“Proponents of wealth taxes seem to think that the wealth of rich folks is gold bars hidden under their beds,” Edwards said. “In fact, looking at billionaires, only 2 percent of their wealth is accounted for by their personal assets such as homes, yachts, and airplanes. The vast majority of their wealth is in productive business assets that generate output for the economy. So the wealth at the top represents active investment that generates jobs and incomes for all of us.”
“Why punish and penalize investment with a wealth tax?” he asked. “It’s much better for the rest of us if the rich invest their wealth into business growth rather than to consume it. A wealth tax would encourage consumption, which would be counterproductive for the economy.”
Ginn, a former White House economic advisor, concurred.
“Less [wealth] would be available throughout the financial system to fund business loans, mortgages, and other loans that generally support new jobs, wage gains, and lower prices,” he said. “Those who will likely feel the brunt of the cost of this tax the most are the non-wealthy.”
A wealth tax “might make for a great political slogan,” the Heritage Foundation’s Joel Griffith added, “but it actually incentivizes the well-off to spend more of their resources now on consumption, instead of investing those resources in ways that will help grow and strengthen the economy and create jobs down the road.”
In fact, wealth taxes have failed across the world where they’ve been tried.
“Warren's proposal has a dismal track record in other countries that have attempted wealth taxation,” Senior Research Fellow at the American Institute for Economic Research and economic historian Phil Magness warned. “It simply encourages the wealthy to relocate abroad, taking their businesses with them.”
Economists say that’s why the global trend has not been passing wealth taxes, but repealing them. Edwards pointed out that in 1990, 12 European countries had wealth taxes. Now? Just three still do.
“Even most of the leftist welfare states in Europe have repealed their wealth taxes because of the complex administration, the negative impacts on growth, and the encouragement of avoidance and evasion,” Cato’s Edwards concurred.
With the economy still struggling to rebound from COVID-19 and crushing government lockdowns, the timing for such a proposal couldn’t be worse, some warned.
“Wealth taxation would only exacerbate [ongoing economic turmoil] by creating an overtly hostile business climate and hampering economic recovery, which translates into persistent unemployment for those already reeling from the punitive effects of lockdowns on the job market,” Magness concluded.
The most ironic part of all? Warren’s wealth tax isn’t even an effective way of raising revenue to fund government programs, the economists said.
“On the unlikely chance that Warren's proposal survived a constitutional challenge,” Magness said, noting the tax’s likely unconstitutionality, “we may reasonably expect to see a similar outcome to what several European countries experienced under their own wealth tax experiments in the last few decades: an exodus of wealthy residents who often take their assets and businesses with them, resulting in a revenue stream that consistently falls short of projections.”
“The wealth tax won’t come close to paying for the promises of the progressive agenda,” Griffith added. “Even the more than $4 trillion in capital over 10 years estimated to be confiscated under one version of the plan covers less than ten percent of the estimated costs of a variety of the big-government proposals of the 2020 presidential campaign.”
Elizabeth Warren’s wealth tax might play well with the progressive base and successfully tap into rising populist sentiment. But economists know it’s a severely misguided proposal rife with unintended consequences that would hurt all Americans—not just the wealthy.
Round up the Kulaks!
2024-Tom Brady takes her on. She’ll be 75 at least.
How do you calculate net worth? Maybe you own a couple dozen franchises each worth $2 million, a home, some cars and savings and retirement. It’s not like you necessarily have an extra million in cash flow to pay 2% tax every year.
The value of a private business is pure speculation and accounting.
Meanwhile, if you own a Picasso and hang out with other Picasso owners, you sell them to each other for $1 and suddenly you’re net worth drops by $100 million.
If you have a family fortune, you divvy it up among the family members. Indeed, you might even get a divorce, at least on paper according to the state, to divide the estate and reduce your tax burden.
Rong link
Right. If this precedent is set, how long will it be until Warren and the other greedy Dems start looking around and seeing how much wealth is in Americans’ IRAs and 401k accounts? Don’t you know they’d like to employ some sort of “wealth tax” to get their greedy hands on some of that money.
Much like the luxury tax that brought on the 1992 recession, this is a disastrous idea for the economy.
Wouldn’t this require a constitutional amendment? The federal government technically has limited ability to tax. There had to be a constitutional amendment to authorize the income tax.
So how will the government know a person’s net worth having to tally everything one owns? Wouldn’t that be considered a tad ‘intrusive’?
Fun fact. To pay for the expenses of reforming the coinage, England instituted a kind of wealth tax. They taxed windows. The collector counted how many windows your house had and sent a bill. After the tax went in, buildings tended to have fewer windows.
So they taxed candles.
Elizabeth will get to the Kulaks. I believe to be considered a Kulak, a somewhat vague concept, you had to be a landowner with one employee. Like a small restaurant, but they’ve put them out of business already. Pocahontas knows where the money is, go for it, bring in donations, hit them with a little and go for the middle class which is where the recurring tax income streams reside. By hit them with a little, tinker with the inheritance tax. Certainly don’t touch step up basis.
We are not going to take the water out of your side of bucket. We going to take the water out of the other side of the bucket.
Couple dozen, sell one every other year. Artwork. Real estate, same thing. Sell some every so often. Economic activity declines, some people might lose their jobs, but so what. You can divy it up, but you need good, expensive lawyers to avoid estate/gift tax on large holdings. Easier to acquire political influence. Without getting into ethical considerations, when you look at estate tax changes, step up changes and a "wealth" tax, the latter, which is simply a personal property tax which most states rejected decades ago, is the most economically harmful
I wonder if Liz has ever considered reducing spending. Have no wampum, and our government doesn't, don't spend it.
I'd also note, the value of a private business is not only speculation, but irrelevant unless you're in the market to sell or borrow.
You can safely assume that that they have already been looking long and hard at tax deferred accounts, with greedy eyes and salivation drooling from their lips. It is only a matter of time.
That’s how the income tax got started over a hundred years ago.
Small tax on the upper incomes.....looked what it’s evolved into today.
Cosimo Medici was a private citizen and never had the power to tax. If you mean the later Archduke Cosimo I, that might be different story.
Local property taxes and State car value taxes are already plenty.
Wealth taxes should start with 4% per year tax on $1 billion+ university endowments and charitable foundations.
16th amendment does not cover this. Wealth is not income.
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