“Billionaires should not exist,” Sen. Bernie Sanders tweeted Tuesday morning as he released a wealth tax that makes clear that he is not kidding around on that score.
If nothing else, Sanders’ proposal will create policy space between himself and Sen. Elizabeth Warren, D-Mass., who released her own proposal to levy a 2 percent tax on extreme wealth eight months ago. That proposal has become not just one of the central policy pillars of her campaign — she says it will be the funding source for many of her other ideas, like universal pre-K and eliminating college debt — but also an unlikely rallying cry, with crowds chanting “Two cents! Two cents!” at her speeches when it comes up.
These two proposals may start from the same philosophical place, but they’re very different, in ways that highlight what separates Sanders, I-Vt., and Warren. Her idea was ambitious and controversial, but Sanders’s idea goes much, much further.
Warren’s plan is relatively straightforward: Tax all assets above $50 million at 2 percent per year, and all assets above $1 billion at 3 percent per year. Sanders’ plan not only kicks in earlier, it includes more gradations that tax the mega-rich much more heavily. Here’s how it would work:
» 1 percent tax on wealth between $32 million and $50 million
» 2 percent tax on wealth from $50 million to $250 million
» 3 percent tax on wealth from $250 million to $500 million
» 4 percent tax on wealth from $500 million to $1 billion
» 5 percent tax on wealth from $1 billion to $2.5 billion
» 6 percent tax on wealth from $2.5 billion to $5 billion
» 7 percent tax on wealth from $5 billion to $10 billion
» 8 percent tax on wealth above $10 billion
If you’re one of the 600 or so billionaires in the country, this tax would hit you much harder than Warren’s would; on that 11th billion, you’d have to pay $30 million under Warren’s plan but $80 million under Sanders’s plan. According to economists Emmanuel Saez and Gabriel Zucman, Sanders’s tax would raise $4.35 trillion over 10 years, significantly more than Warren’s version.
For Sanders, the goal isn’t just to get the overclass to pay its fair share; he wants to cut it down to size. “Under this plan, the wealth of billionaires would be cut in half over 15 years,” the plan says, “which would substantially break up the concentration of wealth and power of this small privileged class.”
While the right may despise wealth taxes for ideological reasons, some liberals dislike them for practical reasons. In Europe, a dozen countries had wealth taxes a few decades ago, but now that number has been reduced to three: Norway, Spain, and Switzerland. Countries decided that the rich found it too easy to avoid the tax, in many cases just moving out of the country, and they wound up raising less revenue than the governments had hoped.
Dean Baker of the Center for Economic and Policy Research, a liberal economist and wealth tax skeptic, predicted to me that if a tax of this sort was in the offing, you’d see billionaires renounce their citizenship before it took effect, or find other creative ways to avoid the tax.
“If Warren and Sanders really want to crack down on inequality, they should address the market structures that generate inequality, such as patent and copyright monopolies, a bloated financial industry, and a corrupt corporate governance structure,” Baker said. “Both have good proposals on these issues, but a wealth tax is likely to be economically wasteful and a political embarrassment.”
Other economists disagree, however. Jared Bernstein of the Center for Budget and Policy Priorities offered me this qualified endorsement:
“Given the extent of wealth concentration and the tax sheltering that protects it, it’s clear to me and most other progressives that the time has come to make a serious run at taxing wealth. I like the simplicity of Warren’s approach relative to Bernie’s, but given that any such tax is and will be a tremendous political reach from where we stand today, the important thing is to get these ideas bouncing around the echo chamber.”
Both Sanders and Warren answer the criticism about the super-rich avoiding the tax by saying they’ll make sure the tax is free of loopholes and beef up the IRS budget for enforcement.
In fact, revitalizing the IRS should be a priority for any Democrat, whether they pass a wealth tax or not, since Republicans have spent decades eviscerating the agency, with the result that it’s incapable of forcing the ultra-wealthy to pay what they owe right now.
On the politics: Getting either plan through Congress would be a long shot at best, but if nothing else, this discussion can expand the debate around taxes. Sanders would probably argue that fundamental change starts with getting people to consider ideas that some find radical.
At a time of grotesque inequality, wouldn’t it be good for Democrats to debate how much we should be making plutocrats contribute? Republicans will inevitably argue that billionaires should not have to be burdened by contributing to the country that enabled them to accumulate their vast holdings in the first place, a stance that won’t do them any favors with the voting public.
As enthusiastically as some Fox News personalities will make that case (they’re already doing it), I say it’s the last thing President Donald Trump would like to talk about. That’s especially true if Sanders or Warren becomes the nominee, since they’d run campaigns centered on the idea that wealthy people have rigged the system in their favor. Trump’s faux-populism only works if there isn’t a more genuine kind voters can compare and contrast.
But this proposal is one more signal from Sanders that he’s going to go further in what he proposes than any other Democrat. It might not help him win the nomination, but it will certainly enable him to keep influencing the policy debate.