Government: Should the ultrarich pay a special tax?
Sen. Elizabeth Warren is the first viable presidential contender in decades to propose a direct tax on wealth, said John Cassidy in The New Yorker. Why is this so daring? In theory, the United States already taxes wealth—“cash, financial instruments, real estate, equity in private businesses, and consumer durables”— through the estate tax. But that levy only “applies to wealth accumulated over a lifetime.” It also contains a lot of loopholes and has been watered down by legislation. By contrast, Warren has proposed a straightforward 2 percent tax on individual assets above $50 million, paid annually, with an additional 1 percent on assets above $1 billion. According to Warren, this would bring in $2.75 trillion in revenue over 10 years. “We can do universal child care for every baby in this country!” she has said. And the country’s ultrawealthy could still afford their Gulfstream jets. “If a version of the Warren tax had been in effect since 1982, Jeff Bezos would be worth $86.8 billion rather than $160 billion. Microsoft founder Bill Gates would be worth $36.4 billion rather than $97 billion.”
This is a path that’s already been explored, said Richard Rubin in The Wall Street Journal. “European countries tried—and largely abandoned—wealth taxes.” Rich people figured out they could easily dodge the levy by switching countries, or by shifting assets into private foundations. Former Treasury Secretary Lawrence Summers estimates that with all the tools available for the rich to shelter their money, “the plan would raise less than half” what Warren’s campaign is projecting. A wealth tax might never even get out of litigation, said Michael Strain in Bloomberg.com. Many legal scholars think it would fall afoul of the Constitution’s limits on so-called direct personal taxation by the federal government—the reason the federal income tax required a constitutional amendment. There’s also a question of fairness. This would affect just 75,000 families. What’s wrong with them? “Why should we have special tax rules for a tiny fraction—0.06 percent—of households?” The real goal is to treat taxes as punishment. And that’s “an abuse of government power.”
There’s at least one rich person who doesn’t see it as punishment at all, said Leonid Bershidsky, also in Bloomberg.com: Bill Gates. Though he’s put more than $36 billion into his charitable foundation since 1994, he knows that even a foundation like his “cannot operate programs on the scale that a wealthy nation’s government does.” And even with the best intentions, donors “cannot always pick the most efficient ways to spend money for the benefit of society.” That’s the job of a well-funded and responsible representative government.