Sen. Elizabeth Warren plans to release a proposal to impose a new “wealth tax” on Americans with net worths of $50 million or more, according to documents provided by her presidential campaign.
The purpose of the new tax would be to slow down and reverse the increasing concentration of wealth among the country’s wealthiest households — a cornerstone of the progressive political agenda and Warren’s campaign.
It is among the first and most serious steps taken by a top-tier Democratic presidential hopeful to address what has become, in the aftermath of the 2008 financial crisis and Occupy Wall Street movement, a key issue for the party and a marker of a shift left that began during the 2016 primary and has accelerated during the Trump presidency.
The proposal calls for levying a 2% tax on Americans’ wealth above $50 million, with an additional 1% tax on billionaires, according to a letter written to Warren from University of California Berkeley economics professors Emmanuel Saez and Gabriel Zucman, who are well known for their work on income inequality and taxing the rich. The Washington Post first reported on the plan.
Saez and Zucman estimate that 75,000 households — less than the wealthiest 0.1% — would be subject to this wealth tax. That group has a net worth of roughly $9.3 trillion, they estimate. Billionaires are worth an estimated $2.5 trillion. The plan would raise around $2.75 trillion over 10 years and the “billionaire surtax” alone would bring in $25 billion in 2019 from roughly 900 families. Both taxes would raise $212 billion this year.
Saez and Zucman have worked with the Warren team to analyze the proposal, a source confirmed to CNN.
The professors determined that the plan would raise around 1% of the gross domestic product per year.
“One of the key motivations for introducing a progressive wealth tax is to curb the growing concentration of wealth,” they say in their letter.
The top 0.1% of families control about 20% of the nation’s wealth in recent years, up from 7% in the late 1970s, they said. Meanwhile, the share of wealth held by the bottom 90% has fallen to 25% from about 35% in the late 1970s. This is mainly because the bottom 90% has racked up debt, including mortgages, consumer credit and student loans.
Currently, the wealthiest 0.1% of families are projected to pay an average of $3.68 million — or 3.2% of their net worth — in federal, state and local taxes in 2019. The proposed wealth tax would add an extra $1.27 million, bringing the total tax burden to 4.3%, the professors estimate.
The bottom 99% of families have a total tax burden of 7.2% of their wealth. This is because they are mainly taxed on income from their labor, while the rich make money from their wealth and that’s taxed at a lower rate.
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