Warren stakes out 2020 ground with wealth-tax proposal

Sen. Elizabeth Warren (D-Mass.) is making a big move on taxes as she seeks to stand out in a crowded Democratic presidential primary field where many candidates will be competing to win over progressive voters.

The Massachusetts senator, who recently announced an exploratory committee for president, is calling for a special annual tax for those with a net worth that exceeds $50 million. The proposal quickly caught the attention of progressives, who praised Warren for floating taxes as a way to tackle wealth inequality.

{mosads}Warren said in an MSNBC interview on Thursday that the tax could raise revenue to help “build opportunity for the rest of America.”

University of California, Berkeley, economics professors Emmanuel Saez and Gabriel Zucman told Warren that the tax would raise about $2.75 trillion over 10 years.

“That’s the kind of money where we could pay for child care, high quality child care, for all of our kids,” Warren said. “It’s the kind of of money where we could do real relief on student-loan debt. It’s the kind of money where we could make a real start on a Green New Deal. It’s the kind of money where we could bring down the cost of health care.”

Warren’s proposal, which she’s calling an “ultra-millionaire tax,” would apply a 2 percent tax annually on net worth between $50 million and $1 billion, and a 3 percent tax above $1 billion.

The tax could be deferred for up to five years, with interest, and the proposal includes provisions aimed at preventing evasion, with increased funding for IRS enforcement and an exit tax for high net-worth people who renounce their U.S. citizenship.

“We’re going to be out there monitoring them and counting them,” Warren said.

Warren is leaning toward joining what’s expected to be a crowded field of Democratic presidential candidates looking to secure votes from the party’s influential progressive wing. Already known for her focus on economic issues, Warren’s wealth-tax proposal could help bolster her liberal credentials.

{mossecondads}Michael Linden, a fellow at the left-leaning Roosevelt Institute, said Warren has spent the past few years proposing ideas to fix what she calls a broken economy. He said the wealth-tax plan dovetails with other proposals she has offered on issues like corporate responsibility and housing.

“A wealth tax fits in squarely within her diagnosis,” he said.

Those involved in Democratic politics said Warren is smart to float the proposal more than ahead of the Iowa caucuses, slated for Feb. 3, 2020, and before other big-name candidates jump into the race.

“By putting out visionary ideas early in the cycle, she’s making sure that those ideas don’t get lost in the blizzard of policy speeches which we’re likely to see as the field heats up,” said Ben Wikler, a senior adviser for MoveOn.

In addition to allowing Warren to stand out among Democratic candidates, the wealth tax could garner attention at a time when much of the focus will still be on President Trump.

“Big bold ideas that capture people’s imagination and allow them to see the different world that would be possible with a progressive leader at the helm of the country [are] going to be really important,” said Neil Sroka, a spokesman for Democracy for America.

He said the main question now is whether Warren’s ideas “catch fire with average voters the same way as they do with progressive policy wonks,” but he said he thinks that they can.

The wealth-tax proposal comes as the left debates how best to tax the country’s wealthiest residents and considers ideas that Democrats might have thought were too risky to even suggest in previous years. Earlier this month, Rep. Alexandria Ocasio-Cortez (D-N.Y.) received considerable attention for floating a marginal tax rate of 70 percent on income over $10 million.

There is a desire among progressives to raise more federal revenue from the rich in an effort to tackle income inequality and offset the cost of spending priorities. And progressives say the debate on taxes has shifted in their direction, arguing that politicians are now catching up to Americans who have long believed that the rich should pay more in taxes.

Frank Clemente, executive director at Americans for Tax Fairness, said policymakers now “can have a mature conversation on tax policy and not be hemmed in by falsehoods espoused by conservatives on what’s possible on tax reform.”

Some Democratic tax experts say Warren’s proposed wealth tax is a smart way to address the fact that there are many high net worth people who use legal loopholes to significantly lower their tax burden.

“We have a major problem in terms of the way we tax the very, very wealthy in this country,” said David Kamin, a former Obama administration official who’s now a law professor at New York University.

Steve Wamhoff, director of tax policy at the Institute on Taxation and Economic Policy, said middle-income Americans are essentially already taxed on their wealth because most of it is in their homes, which come with property taxes. For the rich, however, homes tend to comprise a smaller percentage of their financial assets.

Warren’s proposal would ensure that the wealth of the high net worth taxpayer is treated the same as the wealth of the middle class, Wamhoff said.

But other tax experts, particularly but not exclusively on the right, raised concerns about Warren’s proposal.

Alex Brill, a resident fellow at the right-leaning American Enterprise Institute, said he doesn’t think there should be a wealth tax because “capital accumulation in the economy is an important factor in our ability to grow as a nation over time.”

He also said there would be incentives for wealthy people to spend their time figuring out how to avoid the tax, and the inclusion of an anti-avoidance provision suggests there are ways to sidestep the tax.

Howard Gleckman — a senior fellow at the Urban-Brookings Tax Policy Center, which is led by a former Obama administration official — said there are questions about how the federal government would be able to administer a wealth tax. He noted that several European countries used to have wealth taxes but repealed them in part because of the administrative difficulties.

Some tax experts said there are questions about whether a wealth tax is even constitutional. The Constitution says Congress can impose direct taxes only if they are apportioned based on the population of states, outside of income tax, which is allowed under the 16th Amendment.

But others are confident that a wealth tax would pass constitutional muster. A number of law professors said in letters to Warren that her proposal would hold up in court.

“Constitutional text and history demonstrate that ‘direct’ tax is best interpreted as a narrow category that would not include a net worth tax,” law professors said in one of their letters.

Tags Alexandria Ocasio-Cortez Donald Trump Elizabeth Warren

The Hill has removed its comment section, as there are many other forums for readers to participate in the conversation. We invite you to join the discussion on Facebook and Twitter.

See all Hill.TV See all Video

Most Popular

Load more


See all Video