To understand why the oligarchy in the US absolutely hates the idea of Bernie Sanders or Elizabeth Warren becoming president, one need look no further than their proposals for a tax on wealth to serve two goals: provide income to fund their progressive agendas and to reduce the staggering levels of inequality in the US.
Sen. Bernie Sanders has unveiled his plan to directly tax the wealth of millionaires and billionaires — and it goes substantially further than Sen. Elizabeth Warren’s plan to do the same.
The proposal would cut the wealth of billionaires in the United States in half in 15 years and entirely close the gap in wealth growth between billionaires and the average American family, according to University of California Berkeley economists Gabriel Zucman and Emmanuel Saez, who advised Sanders on his plan. Hitting the richest 180,000 American households, Saez and Zucman estimate the tax would raise $4.35 trillion over the next decade, which Sanders says would go toward paying for his biggest policies, including Medicare-for-all, affordable housing, and universal childcare.
The wealth tax has been one of Sen. Elizabeth Warren’s signature policy proposals on the campaign trail, what she sells as a “two-cent tax” on the 75,000 wealthiest families in the country: She’s proposing a 2 percent tax on household assets above $50 million and 3 percent for households with assets worth more than $1 billion.
But Sanders’s campaign has expanded the idea, with more and higher tax brackets that kick in at a lower wealth threshold.
Here’s how it would work. Sanders wants to levy a 1 percent tax on wealth above $32 million, for married couples, and then slowly increase the tax for wealthier households: a 2 percent for wealth between $50 to $250 million; 3 percent for wealth from $250 to $500 million; 4 percent from $500 million to $1 billion, 5 percent from $1 to $2.5 billion, 6 percent from $2.5 to $5 billion, 7 percent from $5 to $10 billion, and 8 percent on wealth over $10 billion. Same thing goes for super-rich single people, except the wealth thresholds are cut in half. In other words, an unmarried person with $16.5 million in wealth would pay a $5,000 tax, as would a married couple with $32.5 million in net worth.
The public radio program On Point on October 23, 2019 had a debate on the merits of the wealth tax between economist Emmanuel Saez, who supports ythis plan and has advised both Sanders and Warren on this issue, and Lawrence Summers, who served as economic advisor to Bill Clinton an dislikes it. You can listen to the roughly 30-minute debate here starting at the 13:25 mark.
Summers is solidly part of the Democratic party establishment and thus is a protector of oligarchic interests and it was comical to see how he tries to find ways to criticize this proposal in apocalyptic terms, warning that this could collapse the US economy. Note that Warren’s wealth tax is just 2% of wealth over $50 million. Summers says that this could cause hardship to some people because even though they may possess such huge amounts of wealth, they may not have the ready cash to pay the tax. My response to him would have been that such people need better accountants.
He even makes the risible argument that we should not try to tear down the wealthy and that this is a bad time to for such proposals in the face of the Chinese threat to US economic dominance. He says that workers and corporations and the wealthy should work together for the good of the country and he brings out that tired old bromide for doing nothing, that we should focus on closing loopholes in the tax code to make it more progressive. His idea that the oligarchy will make common cause with the rest of us is ridiculous. They have been waging a vicious class war for decades. It is when they are under threat that they come out with this kumbaya nonsense.
Sanders and Warren are quite right that changing the nature of the income tax to close loopholes and make it more progressive is necessary but not sufficient. We need to tax excessive wealth as well.
Since inequality is the whole point of wanting to be an oligarch, it seems kind of silly to expect them to not be unhappy at seeing the main point of their entire life upended. If there was such a thing as “enough” for the oligarchs we would not have the inequality that we do.
I am not complaining about a wealth tax, but how would this not open up a whole new level of accounting practices that devalues a person’s “wealth value” so that it minimizes the tax they will pay? Truly, $5000 to someone who is worth $16.5 million would be a pittance, but “creative accounting” could drive their “worth” to below the $16 million so that they don’t pay any extra. They would rather spend $10,000 on accountants than pay the $5000 tax.
@2
There’s only so far that creative accounting can go. Let’s say you could get some very creative accounting and make 32 million look like 16 million to avoid taxation. If nobody in the country were personally more wealthy than 32 million, I think the taxes have done their job.
While the wealth tax is an interesting idea, it will be fought tooth-and-nail by the oligarchs. I would be surprised to see it enacted by congress, and even more surprised if it isn’t challenged in court for over a decade.
I do like that Sanders’ proposal is more aggressive than Warren’s. That makes Warren’s look more attractive, and not as radical. This is necessary if we are going to get more traction on it.
I’m not against a wealth tax, but what I’d rather see is a far more progressive income tax. A wealth tax puts the battle against the existing oligarchs; adding a 90% tax bracket would not target the already wealthy but those who aspire to wealth. If presented properly, many of the oligarchs wouldn’t oppose such a tax, as their wealth is no longer in the form of income. Over time that wealth would dwindle, but it wouldn’t happen overnight.
However, the advantage of either a wealth tax or a 90% tax bracket really isn’t the amount of money entering the public coffers. The advantage is that both already wealthy people or high-income people will voluntarily reduce their wealth or income to avoid paying taxes. In the past, during the 90% tax bracket years in the 1940’s until the end of the 1960’s, once the executive boards hit the 90% tax bracket they didn’t bother to take more of the company profits. Those profits instead went to employee health care, research and development, and employee wages. They also went to executive perks like airplanes, houses, and corporate campuses rivaling small universities, but there is practical limit to how much you can spend on such things. This is why I like a 90% bracket better than a wealth tax. With a wealth tax the wealthy will donate their money to avoid giving it to the government, which is okay but not as useful to the economy as businesses sharing more of their profits with their employees. In the first case, the donations may be made to few, large non-profit organizations or even as large donations to relatives or other people in their inner circle. In the second case, the distribution is of smaller amounts of money over a wider section of the population, to people who will turn around and spend their increase in discretionary income, which will have larger and a more lasting economic affect. My $0.02.
But as you seem to understand, that’s not good enough. So…?
Yes, they definitely would. They already whine about everything, and I”m sure this case would be no exception.
It also doesn’t matter what they prefer or don’t prefer, because the point here is to structure our system more fairly, which is precisely not about catering to those specific people who happen to be the most powerful. Flip your whole thought process upside down for me, and you’ll probably get the point pretty quickly.
The point is also not to have a way of telling ourselves that this one time we managed to actually win a political “battle” (one with the oligarch stamp of approval). Like I said, the reason we should do things like this is so the country will be better/fairer as a result, not because it happens to be one of the “fights” that we think may be winnable for us.
That’s a silly reason to do most things; but look, think about what we’re honestly talking about here: we are forcing people to give up property. To state the obvious, that’s not normally or generally okay. But it’s acceptable in this case because we have very good justification for implementing that kind of taxation scheme, and the harm is actually very minimal. (I won’t argue it here, and just assume you understand that.) Although it may seem counterintuitive to some, at least if they put very little thought into it, this is actually how things should work in a free and democratic society. So we don’t have a moral/political problem to be concerned about with this.
But that means it’s not acceptable because we believe (rather incredibly) that there won’t be much complaining or because we think we can somehow get away with it. If that were all that we really had to justify the practice (as many glibertarians imagine), I wouldn’t support it. But that’s not really what’s going on. So there’s no good reason why that kind of thing ever has to enter the discussion.
If instead we’re honest and clear about how this all actually works and why it works as it does, then people should see that it all makes perfect sense and is acceptable. Maybe then, fewer will express their bullshit complaints. But if some still do, that’s okay too and is probably unavoidable.
We already tax higher income brackets more. You can say it should be increased, and I’ll agree. But that’s a difference in degree, not a difference in kind. So what results have we seen with that? Their wealth hasn’t dwindled, and economic inequality has increased. So this dwindling theory doesn’t seem much better than the trickle-down theory. Things just seem not to work that way.
This is partly because the wealthy can avoid paying the taxes you might think they owe (legally … never mind illegal behavior for now). For one thing, they can hire accountants to take advantage of the system in all sorts of different ways, while not everybody can.
They can send investments overseas or put things into other kinds of assets. (Not necessarily taxed as income, like retirement accounts. So while all those years/decades drag on, and you had expected the money to somehow go away, it doesn’t go anywhere but does accumulate with interest.) How are they able to do that? Because they do already have tons of money, with no real use for practically all of it. So they can afford to stash tons of it away like this, not use it or pay taxes on it, but nonetheless gain interest from it. And if nothing else happens, much of it gets inherited by the next generation, who will again be filthy rich and not use their money: wash, rinse, repeat for as long as you want, and I think shit just gets worse over time. Anyway, not everybody can do this either, certainly not to the extent that they wealthy can. But when they do it, their money stays with them and can easily grow instead of dwindle. And be a totally useless drain on our economy.
Of course, these are also the same rich and powerful people who can lobby their pets in congress to make laws favorable for them. That’s how we got into this fucked up situation in the first place. Making one number in a tax bracket bigger would obviously not change any of that. I doubt you believe that it would, at least upon reflection, but it is worth pointing out.
I’ve been advocating for a “wealth tax” for years. I called it an asset tax, but same thing. I love these two candidates even more.
@flex: You’re right about any such legislation being fought tooth and nail by anyone who could be affected by it. But one of the reasons it’s good to have that case be made is actually pretty simple and very much a part of your argument: it expands what is possible.
Your basic argument is that it’s not possible because a bunch of people won’t go along with it. I want exactly the same thought to go through everyone’s heads the next time someone dreams up a giveaway to the billionaires like the tax racket Trump enacted. Yes, we need some form of relief from the rapacious moneygrubbers but they’ll never go for anything that would do that. So we might as well shift the conversation.
Politics is a lot like haggling. If you make concessions and set out initial conditions that are at the limit of what you’re willing to accept, you’re sure to be disappointed. The only way to get what you want is to aim for something you’d like to have and be willing to trade down to a position you’d accept in return for the other side doing the same.
In politics it’s up to the politicians to stake out good positions and outline viable plans. As voters it’s our job to give them ammo in the form of votes to get it done. So vote for what you want, not what you think some other jerk who’s working against you will allow you to have. If you don’t, the jerks don’t have any reason to care what you want much less give it to you.
Rich people will fight Sander’s plan with everything they’ve got. If they are worth $100 million, their tax will be $1,180,000. Do you think they will willingly give up over $1,000,000 to taxes? Even Warren’s plan would tax them $1,000,000. Do you REALLY think they will not do everything in their power to keep either of these two candidates from being elected. Hell, all you have to do is look at Zuckerberg’s acceptance of money for lies on his platform just to keep the money rolling in. The rich DO NOT CARE about the general population other than how much money they can extract from them.
What I enjoy is how Warren explains her plan to the public, and how people respond. She compares it to property taxes that all homeowners pay in most US locales to fund local government, and it makes a lot of sense. Suddenly Americans aren’t behaving like ‘temporarily embarrassed millionaires’.
Realize, though, that the wealth tax Warren proposed (I haven’t looked into Bernie’s and this is the first I’m hearing about it) includes non-liquid assets like art work when determining one’s wealth. If much of one’s wealth was made up of such assets, then, yes, they could have difficulty, good accountant or not.
That said, I am highly skeptical anyone would fit such a scenario. Also, I don’t frankly give a damn if these people have to work on liquifying such assets if they have that much in non-liquid assets! Such a person is basically a wealthy horder! What are they actually contributing to society?!
@2
I do believe Warren has tried to address some of these concerns in her plan, so you may want to consider reading it. Others here have hinted at how it won’t be quite that simple. anat @9, for example, mentions Warren describing it like a property tax and I believe, much like with property, the owner is not the one assessing the value of their property. Other people assess its value. Perhaps the way to avoid such a tax is to then not report on all of one’s assets. I’m not rich, so I have no idea how difficult that would actually be.
@6, consciousness razor, and @8, lanir,
I must have been somewhat unclear. I do not oppose a wealth tax, or oppose agitating for one. And I do understand the need in negotiations to start with an extreme position so there is some room to back off if necessary.
But I see a wealth tax as basically impossible to get through congress, even if there is a large turnover. This doesn’t mean people shouldn’t try. And more importantly, just because someone (me) on the internets thinks it won’t get any traction in congress, would be a really piss-poor reason to not try. I understand that.
On the other hand, bringing back a 90% tax bracket does have a few things going for it.
1. It’s been done before, and worked, to both reduce inequality and spur economic growth. Being able to point to a successful taxation scheme to spur economic growth and reduce inequality is a lot less scary than an unknown wealth tax. No matter how much detail is in the proposal.
2. Income is already being tracked. Maybe we can improve our ability to track income to catch the scofflaws, but every year we report our income to the US Governments and they require us to give some of it to them to spend on public goods. In other words, the US population is already familiar with and generally accepts income tax. This will be very different with a wealth tax. Someone else assessing the value of your personal property is going to take some social adjustment.
3. consciousness razor made a point about how we already have progressive taxation and it isn’t doing anything to reduce inequality. My counter is that when the highest tax bracket is 37%, call it 50% if you add in state taxes and city taxes, the high-income earner still gets $0.50 of every dollar they earn in the bracket. It doesn’t take much to see that if they want a million-dollar salary they need to be paid 2 million dollars in income. While those of us who are not in high demand for our executive abilities (or because we belong to the right club which is often more important) cannot command million-dollar salaries, the people who can request a million-dollar salary can usually request double that, and get it. However, bring in a 90% bracket, and even ignoring state and city taxes, to earn that million dollars they need to be paid 10 million. Even some of the greediest executive boards, lawyers, or athletes may balk at giving someone a salary 10-times what the person really wants for take-home. This is a much harder sell than twice their take-home salary. Again, this has been tried successfully before.
4. As I mentioned above, the effect of a 90% income tax did directly improve the take-home pay of workers. Corporations are structured to collect money. Today that money siphons right to the top of the structure. But if the people at the top of the corporate structure don’t want to take it, it will be used somewhere. In the past, when there was a 90% tax bracket, part of that money was used to increase worker pay. And then, after the money was paid to, and spent by, workers the money would get to the government through income taxation of the worker’s salaries. So government revenues do increase, allowing government investment in infrastructure. The wealth tax proposals I’ve seen just give the money straight to the government, which will help with infrastructure but doesn’t help workers nearly as much.
5. Another aspect of higher worker pay is that they will spend that money on the economic goods they desire. I am not a capitalist, but there are aspects of capitalism which work well. A well-regulated market can encourage innovation. I feel that natural monopolies should be socialized, but there is a place for regulated market capitalism for most goods. Increasing worker pay improves the power of that market.
6. It puts the decision to not make an obscene amount of money on the people deciding salaries. That is, if an executive board really does feel that a person is worth a $30 million salary, and the person only takes home $3 million of it, that’s fine. The government doesn’t care. The executive board made the decision knowing that the government would take that money. The government is not setting a cap on income, but setting the rules of taxation. How much people are paid is still in the hands of the employers/boards.
7. Wealth is fluid, income is defined. In the mid-1980’s someone with a large collection of beenie-babies had a large amount of wealth. Three years later they didn’t. It is entirely possible that someone could be wealthy in the futures market when their fortune is assessed, but not have the money to pay the tax when it becomes due. I own some Greek Drachmas from before the EU. Forty years ago, when I got them, they were worth the equivalent of $20. Today they have no value. A Monet painting can be worth $500,000 today, but only go for $200,000 at a sale. How much wealth does this represent to the owner? $500,000 or $200,000, or priceless? Income, on the other hand, is far better defined.
8. I don’t really care about the ultra-rich beyond the fact that because of their greed they are harming other people. If everyone had quality food, clean water, comfortable shelter, quality health care, the education they desired, the hobbies they were interested in pursuing, and enough spending money to enjoy life, I wouldn’t care if some people had 1000 times the wealth of others. It’s when the wealthy are wasting resources which could help other people. Or worse, just sitting on resources rather than putting the wealth they cannot possibly use back into the economy without expecting a ROI greater than their investment.
But even saying all that, I’m willing to give a wealth tax a try. I can also say that I think a 90% tax bracket is a better idea. These are not mutually exclusive ideas.
Not correct; they will fight tooth and nail against anything which might impact their wealth and influence. The only things they will not fight are things that will do nothing.
@flex: I feel like the practice of tax dodging has become much more sophisticated and more effective than when the 90% tax bracket existed. So if it worked as intended, it might be godawful slow about it. And it’s already the slow approach to begin with. Which opens up the potential for a later Congress and executive branch to cut it out before it has any meaningful effect. The Republican base is already programmed to cheer on any tax reduction even if it does nothing for them. They’ll swallow a bunch of false equivalencies between their paycheck-to-paycheck life and the financials of a billionaire without batting an eye. And as slow as it’s likely to be about making meaningful changes, it won’t have the kind of support enjoyed by programs that people can see affecting their lives (medicare, social security, va healthcare, etc.)
If the 90% tax bracket is what we get then that’s a lot better than nothing. But I still have some real reservations about how effective it would really be on it’s own. So I hope it doesn’t end up being the first proposal for addressing income inequality.