A 2% tax on America’s 75,000 wealthiest families would raise $2.75 trillion over the next decade.
This is at the heart of Democratic presidential candidate Elizabeth Warren’s economic plan to reduce the enormous wealth gap between the top .1% and to raise federal revenues. The families that would eligible for this wealth tax would be those with over $50 million in assets. Families with over a billion dollars in assets would pay 3%.
E-War is not mincing around the discussion – she wants redistribution of wealth and believes that we’ve given the free market enough of a chance to “correct” the imbalances, and now it’s time for government intervention. This is obviously a polarizing subject among everyone else who makes up the 99.9% that would NOT be subject to the wealth tax, because ideologically they either believe or don’t believe that the government can better allocate these resources.
Upper middle class earners would be asking themselves “Where does it end? When do they come for my wealth? Why are they punishing success?” The rest of the middle class will be reminded of the “slippery slope” towards socialism and eventually full blown communism. Americans don’t like the idea of there being a ceiling over their heads, regardless of how far away from that ceiling they might currently reside.
According to the Federal Reserve Board’s Survey of Consumer Finances, the top 5% of American households have 2/3rds of the country’s wealth. The bottom 60% have only 2% of all net worth. Very few people would seriously argue that this isn’t a problem, even if they disagree on how severe the trajectory of this trend is, or if they’re not on the same page about how to fix it.
One of the trickiest aspects of implementing a wealth tax is that the value of assets, unless they’re publicly traded stocks and bonds, are not exactly agreed upon by everyone. You don’t find out what a home or a building is worth until you’ve actually sold it. Until then, it can be appraised, but the appraisal itself isn’t a hard number. Multiple appraisals for property could arrive at multiple valuations. And because values change over time, appraisals would have to be carried out annually. Now, substitute real estate assets for small business ownership. There’s no ticker symbol. Impossible to measure in a uniform way across industries and geographies.
Think of all the potential for corruption and fraud with all of these households being put into a position to manipulate all of these subjective, ephemeral numbers. The President of the United States reportedly spent his career lying about the values of his properties to tax assessors, to banks and other lenders, to magazine publishers and to professional sports leagues – hiking their worth when it would benefit his interests in some cases, and then lowballing in other cases, depending on what might suit the negotiation he was in at that moment in time. He’s admitted in court that the values of his assets change with his feelings about them. And he’d been able to do it for decades without much of a problem.
How could any agency or institution possibly carry out the enforcement of something at this massive scale?
For more on this subject, I highly recommend you read this Gary Burtless op-ed at Brookings on the subject of accurately measuring the assets of the super-rich. Some of the challenges involved make the Warren plan far less of a slam dunk even if you agree with her premise that the wealth gap is one of the biggest problems we face as a society.