While the coronavirus pandemic it wreaks havoc on the economy and disproportionately affects low-income Americans, the super-rich have seen their wealth rise. Massachusetts Sen. Elizabeth Warren, who has long advocated a fortune 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 to Congressman Pramila Jayapal of Washington and Congressman Brendan Boyle of Pennsylvania, would place a 2% annual tax on families and trusts between $ 50 million and $ 1 billion. It would also place an annual surcharge of 1% on households and funds of $ 1 billion. Lawmakers say the measure 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 revenue, to create more opportunities in the United States,” said Warren. “But it is a wealth tax that we need especially because of the changes in this pandemic country. We saw the billionaire class’s wealth in America increase by more than a trillion dollars last year.”
Warren has openly supported a fortune tax for some time – making it one of his signature political platforms in the campaign when he ran for president in 2020. “Two cents” – referring to the 2-cent tax that an ultra taxpayer -rico would owe on every dollar – even adorned his 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.
About 100,000 American families would be responsible for the ultra-millionaire tax, according to an analysis by economists at the University of California-Berkeley. They also estimated that it would generate about $ 3 trillion in revenue in 10 years without increasing taxes on 99.95% of American households, who 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% – that is, zero point one percent – owns more than 18% of America’s wealth,” said Jayapal. “So compare that to the entire bottom half of Americans who only own 1.5% of their wealth.” Jayapal also noted the difference in racial wealth with white families having an average wealth that is 14 times that of black families and eight times that of Hispanic families.
The group of lawmakers argues that the wealth tax should be at the “top of the list” to help pay for the plans as the United States emerges from the economic crisis of the coronavirus pandemic with funds for daycare and early childhood education, infrastructure and other priorities .
“I recognize that at some point we will have to turn to revenue. Well, here is a fair way to do that,” said Boyle, acknowledging COVID’s recent relief spending. “This is a much better way to earn revenue than taxing the middle class and the poor in this country.”
This is at a time when the $ 1.9 trillion American Redemption Plan was approved in the House at the beginning of Saturday and goes to the Senate. The White House said it would be the first part of the 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 government has already indicated that it is looking for other options to pay for future investment costs. Last month, Treasury Secretary Janet Yellen said that a wealth tax has “very difficult implementation problems”. On several occasions, she and other Biden government officials discussed the examination of the corporate tax rate and loopholes instead.
At the same time, passing a wealth tax would be difficult in the Senate. 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 chamber divided by 50-50 according to party lines, obtaining a majority, let alone 60 votes, can be a challenge. Warren called for an end to the obstruction, saying the procedural mechanism to delay or block a vote gives Senate minority leader Mitch McConnell veto power.
The number of countries with wealth taxes has fallen in the past 30 years. In 1990, 12 European countries had taxes on wealth, but in 2018, that number dropped to three. Economists note that there are several challenges associated with estimating the revenues that a wealth tax would generate, in part due to the way assets are valued.
“In the field of equity, in the field of the tax burden, it can be very attractive. A large amount of money affecting relatively few taxpayers, all of whom are at the top of the wealth distribution,” said Janet Holtzblatt, a senior member of the Center for Urban-Brookings Tax Policy. “But it can have dripping effects in a negative way if it damages the economy, if it damages investment, and it may not have as strong an effect as the supporters want because of the ways to avoid and evade a tax.”
The Ultra-Millionaire Tax Law, as proposed, includes several provisions to block tax evasion, including a $ 100 billion investment in the IRS, a minimum audit fee of 30% for taxpayers subject to tax and an exit tax 40% on the net is worth more than $ 50 million Americans who renounce their citizenship in an attempt to evade payment of the tax.
“For any good tax, you want it to work without these extremely strict measures to prevent evasion,” said Tax Foundation economist Daniel Bunn. “If you need that kind of penalty fee to avoid evasion, then I would say that you are probably planning the wrong tax to start with.”
Bunn also notes that a wealth tax could cause foreign investors to replace local billionaires as owners of capital.
“If you reduce the return on wealth for American citizens and you don’t have something similar for high-net worth individuals who are investing in the United States, you will end up changing the ownership structure of American assets,” said Bunn. so instead of US citizens owning many of the assets in the United States – be they homes, stocks or other assets – you are essentially creating 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 almost two-thirds of Americans strongly agree or to some extent that the very wealthy should contribute more.