Many of the folks trying to become the Democrat to challenge Donald J. Trump in 2020 support raising taxes on the wealthy.
It’s a popular U.S. campaign rallying cry, but globally, such taxes on net worth are vanishing.
All for taking from the rich: The Democratic Party is bucking the global dying wealth tax trend. One of its top goals remains raising the top ordinary income tax rate, which the Tax Cuts and Jobs Act (TCJA) cut from 39.6 percent to 37 percent.
Former Vice President Joe Biden wants to go back to that pre-tax reform top rate for individuals, as well as the 28 percent corporate income tax rate.
South Bend, Indiana Mayor Pete Buttigieg is more vague, simply calling for a wealth tax.
But there are some specific tax proposals to get more from the rich.
Sen. Elizabeth Warren was the first to talk in detail about a wealth tax. The Massachusetts Democrat wants, among other taxes on the rich, an Ultra-Millionaire Tax. Warren’s wealth tax would be 2 percent on net worth of more than $50 million and 3 percent on net worth of more than $1 billion.
Former Housing and Urban Development Secretary Julián Castro’s plan would boost taxes on the wealthy and expand or create a host of federal programs for low- and middle-income families, including universal child care, paid family leave and a $15-per-hour minimum wage.
New York City Mayor Bill de Blasio says he wants to “tax the hell out of the wealthy.” Among the ways he proposes are a 1 percent added wealth tax on assets between $10 million and $25 million, a 2 percent tax on assets of $25 million to $100 million and a 3 percent tax for those with assets of more than $100 million. This would be in addition to a 40 percent top ordinary income tax rate.
Bernie Sanders focuses on what the rich leave behind. The Vermont Independent (he’s only a Democrat during primary season) would tax estates valued from $3.5 million to $10 million at a 45 percent rate. The rate would be 50 percent for estates worth $10 million to $50 million, 55 percent for estates valued from $50 million to $1 billion and 77 percent on estates exceeding a valuation of more than $1 billion.
Waning wealth taxes: You also can find out more on what wealth taxes entail and how they [are supposed to] work in the paper by the Washington Center for Equitable Growth’s paper on net worth taxes.
It’s a section of that Washington, D.C.-based think tank’s analysis that gets this weekend’s Sunday Shout Out .
Authors Greg Leiserson, director of Tax Policy and senior economist at the Washington Center for Equitable Growth (WCEG), and WCEG research assistants Will McGrew and Raksha Kopparam note in their paper’s section on net worth taxes around the world that such levies are declining globally.
Twelve countries that are part of the Organisation for Economic Co-operation and Development (OECD) had net worth taxes in 1990. In 2000, only nine countries were collecting these taxes.
By 2018, the number had dropped to just three: Norway, Spain and Switzerland.
The trend away from net worth taxes has been part of a broader trend of reduced taxation of the wealthy around the world. The only change came for a short period during the Great Recession, when Iceland and Spain restored their net worth taxes.
Opposite route in America: So why are the Democratic candidates bucking the global trend? The obvious answer is that economic inequality in the United States has been getting more and more attention since the first Occupy Wall Street protests in 2011.
The TCJA benefits that are skewed more toward the wealthy than middle class taxpayers has exacerbated this complaint, at least on the campaign trail.
Plus, and critically important as Uncle Sam’s deficit crosses the $1 trillion mark, the potential tax take is appealing.
The WCEG paper notes that “the revenue potential of these [net worth] taxes remains large in absolute terms. The Swiss tax raised about 1 percent of [gross domestic product] GDP in 2017 and the Norwegian tax 0.4 percent of GDP. Applied to the U.S. economy, revenues at these levels would correspond to about $80 billion to $200 billion in 2018. “
There’s also the sheer amount money in the United States, albeit concentrated in a few hands.
“Regardless of measure, U.S. aggregate wealth is large. In conjunction with the highly skewed nature of the wealth distribution, this suggests that the revenue potential of a net worth tax in the United States is large, even if applied only to the very wealthiest families,” write WCEG analysts. “The wealthiest 1 percent of families holds $33 trillion in wealth, and the wealthiest 5 percent holds $57 trillion.”
Monetary and political appeal: Bottom line, says the paper’s authors, those looking for “a highly progressive tax instrument that raises substantial revenue would find a net worth tax appealing.”
And even more appealing to politicians looking to energize a diverse and less-than-rich electorate, is that wealth taxes, according to WCEG, “would thus generally shift the tax burden not only from low-wealth families to high-wealth families, but also from younger families to older families and from families of color to white families.”