Senator Elizabeth Warren (D-Mass.) is set to announce plans for a new tax on Americans making more than $50 million, according to an economist advising her on the plan. Warren, a Democrat 2020 presidential contender, has made income inequality a key tenant of her time in office and will push this massive new tax in the coming weeks.
Progressive economic advisors to Warren Eammanual Saez and Gabriele Zucman are suggesting a 2 percent tax on Americans with assets above $50 million and a higher tax of 3 percent on those with more than $1 billion. According to their own analysis, this tax would raise taxes on American by $2.75 trillion over ten years from 75,000 families. This is extremely ambitious and assumes that high-earners do not relocate their homes and wealth elsewhere.
The proposal comes on the heels of Democrat Congresswoman Alexandria Ocasio-Cortez’s proposal to impose a 70 percent top tax rate on people making more than $10 million per year, a tax that the nonpartisan Tax Foundation estimates will either generate $189 billion or lose $64 billion over ten years, depending on whether it is imposed on ordinary income or capital gains as well.
The Warren wealth tax proposals would also increase funding for the Internal Revenue Service (IRS), mandate audits for certain high earners, and impose a one-time tax on Americans who renounce their citizenship.
These ambitious and aggressive proposals have been tried and failed miserably internationally, with France providing a good example of the consequences. A wealth tax imposed on assets over 1.3 million euros led to an exodus of taxpayers from the country. In 2016 alone, 12,000 millionaires left France, the highest outflow in the world. The year prior, in 2015, 10,000 millionaires left France for other countries, according to a report by New World Wealth. The runner up for most millionaires leaving a country in 2016 was China, with 3,000 departures.
Prime Minister Philippe remarked, “When someone leaves the country because of the wealth tax… collectively all French lose.” The argument holds true in America, where a mass exodus of taxpayers would leave no one to pay for the growing demands of higher government spending.
The top one percent in America pay 39.4 percent of federal income taxes, according to the Congressional Budget Office. If these people flee, they take with them the tax revenue they currently pay as well.
This proposal would harm economic growth, incentivize the investment of money overseas, and generate no where close to the amount of money Warren’s economic team estimates.