It sounds good in a stump speech — taxing the upper crust to fund sweeping policies for the masses.
That’s the platform that U.S. Sen. Elizabeth Warren has built for her presidential campaign — an “ultra-millionaire tax” on the wealthiest 75,000 American families that she claims would raise $2.75 trillion over 10 years. Warren has touted the tax as a way to pay for universal child care, free college, wiping out student loan debt and several other vote-enticing giveaways.
Economists and policy experts tell the Herald that Warren’s populist plan isn’t feasible given today’s current political divide on Capitol Hill, nor is it the best mechanism for getting the rich to pay more into the nation’s coffers. But that doesn’t stop it from being a popular campaign trail pitch.
“From a political perspective, it’s absolutely a winning statement for a candidate that wants to get better traction,” said Mark Williams, a finance lecturer at Boston University.
But with “one group that’s bearing the benefit and one very small group that’s bearing the costs,” Warren’s platform “sends a negative message,” Williams said.
There are 127.6 million households in America, according to the U.S. census. Warren is proposing a wealth tax on just 75,000 of them, which she called the “top 0.1%.”
“Households would pay an annual 2% tax on every dollar of net worth above $50 million and a 3% tax on every dollar of net worth above $1 billion,” Warren stated in a web post. Her economic team calculated the revenue at $2.75 trillion over a decade.
The ultra-millionaire tax is the financial backbone of most of Warren’s policy proposals. She claims it will pay for cancelling $640 billion in student loan debt, plus a universal free college program that raises that price tag to $1.25 trillion. She’s also citing it to fund her plan to fight the opioid crisis, with $100 billion over 10 years.
Anne Kim, vice president of domestic policy for the Progressive Policy Institute, said she believes Warren’s “on the right track in terms of how people feel about how the economy is rigged against them.” But, Kim said, “Focusing an ultra-millionaire tax on so few households smacks of unfairness.”
Boston University economics professor Laurence J. Kotlikoff said, “She’s right to try to look for an alternative way to tax the rich. The wealth tax is not the best way though, because it reduces the incentive for people to accumulate and save.”
Economists instead suggested raising the income tax on a broader swath of high-end earners, or taxing consumption instead of wealth. A wealth tax also raises the potential for legal and even constitutional challenges.
Other countries that tried a wealth tax “found it difficult to enforce,” said Dean Baker, senior economist at the Center for Economic and Policy Research. “Assets aren’t easy to track.”
And should she be elected president, Warren would have to push her slate through what could remain a Republican-controlled Senate — and win over moderates in her own party.
“For any Democrat who thinks they can defeat (President) Trump, they’re likely going to have to face the reality of a Democrat-controlled House and a Republican-controlled Senate, which means that their legislative policy agenda is going to be extremely difficult,” said John Cluverius, a University of Massachusetts Lowell political science professor. He added that having a “radical change in tax policy” and a “very ambitious progressive policy agenda” is “likely to make her less popular over time and likely to lose her allies even within her own party in Congress.”
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