Like the corona pandemic destroys great damage to the economy and disproportionately affects lower income Americans, the super rich have seen their wealth increase. Massachusetts Senator Elizabeth Warren, who has long called for a wealth tax, unveiled legislation on Monday that would tax the super-rich on their net worth.
The proposal, called the Ultra-Millionaire Tax Act and released with Washington Congressman Pramila Jayapal and Pennsylvania Congressman Brendan Boyle, would impose a 2% annual tax on households and trusts of between $ 50 million and $ 1 billion. It would also bring an additional 1% annual tax on households and trusts in excess of $ 1 billion. Lawmakers say the move would level the playing field and narrow the racial wealth gap.
“This is a wealth tax that has been needed for a long time. We need it to generate more income, to create more opportunities in the US,” said Warren. “But it is a wealth tax that we need mainly because of the changes in this country during the pandemic. We have seen the wealth of the billionaire class in America increase by more than a trillion dollars in the past year.”
Warren has been an outspoken supporter of a wealth tax for a while now, making it one of her signature policy platforms on the campaign trail when she ran for president in 2020. ‘Two cents’ – referring to the 2 cent tax imposed on an ultra-wealthy taxpayers would pay owed on every dollar – even graced her campaign products and was sung at rallies. The bill is now one of her first steps as a new member of the Senate Finance Committee.
According to an analysis by economists at the University of California-Berkeley, about 100,000 American families would be liable for the ultra-millionaire tax. They also estimate that it would generate an estimated $ 3 trillion in revenue over a 10-year period without taxing 99.95% of US households, who have a net worth of less than $ 50 million.
“Today, the richest 1% owns 75% of the country’s wealth and the richest 0.1% – that’s zero point one percent – owns more than 18% of the US wealth,” said Jayapal. “Compare that to the whole bottom half of Americans who own only 1.5% of the wealth.” Jayapal also noted the racial wealth gap with white families with an average wealth 14 times that of black families and 8 times that of Hispanic families.
The group of lawmakers believes that the wealth tax should be at the top of the list to help pay for plans as the United States digs out of the economic crisis of the coronavirus pandemic with resources for childcare and early education, infrastructure and other priorities.
“I recognize that at some point we’ll have to look at revenue. Well, this is a fair way to do it,” said Boyle, who acknowledged COVID’s recent emergency relief spending. “This is a much better way to generate income than taxing the middle class and poor people in this country.”
This comes as the US $ 1.9 trillion bailout was early on Saturday in the House of Representatives and goes to the Senate. The White House has said this would be the first piece of legislation and be followed by another with investments in long-term endeavors such as infrastructure.
However, President Joe Biden did not support a wealth tax when he ran, and his administration has already indicated that it is looking at other options to cover the costs of future investments. Last month, Finance Minister Janet Yellen said a wealth tax has “very difficult implementation problems.” On several occasions, she and other officials from the Biden administration have spoken instead about examining the corporate tax rate and loopholes.
At the same time, the approval of a wealth tax in the Senate would prove difficult. The Ultra-Millionaire Tax Act is co-sponsored by Democratic Senators Bernie Sanders, Sheldon Whitehouse, Jeff Merkley, Kirsten Gillibrand, Brian Schatz, Ed Markey and Mazie Hirono. But with the room split 50-50 along party lines, getting a majority, let alone 60 votes, could be a challenge. Warren has called for the filibuster to be dropped, arguing that the procedural mechanism to postpone or block a vote gives Senate Leader Mitch McConnell a veto.
The number of countries with wealth tax has declined over the past 30 years. In 1990, 12 European countries had wealth tax, but in 2018 there were only three. Economists note that there are multiple challenges to estimating the income a wealth tax would generate, in part because of the way assets are valued.
“In terms of equity, in terms of tax burden, it can be very attractive. A large amount of money involves relatively few taxpayers, all of whom are at the top of the asset allocation,” said Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center. “But it could have negative consequences if it hurts the economy, if it hurts investment, and it may not have as strong an effect as desired by supporters for ways to avoid and evade a tax.”
The proposed Ultra-Millionaire Tax Act contains several provisions to combat tax evasion, including a $ 100 billion investment in the Internal Revenue Service, a minimum audit of 30% for taxpayers subject to the tax, and a so-called exit tax of 40 % on net worth more than $ 50 million Americans renouncing their citizenship in an attempt to pay the tax.
“For any good tax, you want it to work without these super-strict avoidance measures,” said tax Foundation economist Daniel Bunn. “If you need those kinds of penalty rates to avoid evasion, I’d say you’re probably misrepresenting the tax in the beginning.”
Bunn also notes that a wealth tax could cause foreign investors to replace domestically billionaires as owners of capital.
“If you lower the return on wealth for US citizens, and you don’t have something similar for wealthy individuals investing in the US, you end up changing the ownership structure of US assets,” Bunn said. so instead of US citizens owning much of the assets in the US – be it housing or stocks or other assets – you are essentially creating a preference for foreign ownership through tax law. “
But the idea of a wealth tax has broad support in the United States in general. A Reuters / Ipsos poll last year found that nearly two-thirds of Americans strongly or somewhat agree that the very wealthy should contribute more.