As thewreaked havoc on the economy and disproportionately affects low-income Americans, the super-rich have seen their wealth increase. Massachusetts Senator Elizabeth Warren, who has long called for a wealth tax, on Monday unveiled legislation that would tax the super-rich on their net worth.
The proposal, called the Ultra-Millionaire Tax Act and released with Congressman Pramila Jayapal of Washington and Congressman Brendan Boyle of Pennsylvania, would impose a 2% annual tax on households and trusts between $ 50 million and $ 1 billion. dollars. It would also impose a 1% annual surtax on households and trusts over $ 1 billion. Lawmakers say the move would level the playing field and narrow the racial wealth gap.
“It’s a wealth tax that’s been needed for a long time. We need it to generate more income, to create more opportunity in America,” Warren said. “But it is a wealth tax that we especially need because of the changes in this pandemic country. We have seen the wealth of the billionaire class in America rise by more than $ 1 trillion over the past year. last year.”
Warren has been a staunch supporter of a wealth tax for some time – making her one of her iconic political platforms on the election campaign when she ran for president in 2020. “Two Cents ”- referring to the 2-cent tax an ultra-rich taxpayer would owe on every dollar – even adorned his campaign merchandise and was chanted at rallies. The bill is now one of his first steps as a new member of the Senate Finance Committee.
About 100,000 American families would be liable for the ultra-millionaire tax, according to an analysis by economists from the University of California-Berkeley. They also estimated it would generate roughly $ 3 trillion in income over 10 years without raising taxes for 99.95% of U.S. households, whose net worth is less than $ 50 million.
“Today, the richest 1% own 75% of the country’s wealth and the richest 0.1% – or zero point one percent – own over 18% of America’s wealth,” Jayapal said. . “Then compare that to the entire bottom half of Americans who own only 1.5% of the wealth.” Jayapal also noted the racial wealth gap, with white families having an average wealth 14 times that of black families and eight times that of Hispanic families.
Group of lawmakers argues wealth tax should be ‘top of the list’ to help pay for plans as the United States emerges from the economic crisis of the coronavirus pandemic with funds earmarked for custody children and preschool education, infrastructure and other priorities.
“I recognize that at some point we’ll have to look to revenue. Well, here’s a fair way to do it,” Boyle said, acknowledging recent COVID relief spending. “It’s a much better way to earn income than to tax the middle class and the poor in this country.”
It comes as the $ 1.9 trillion US bailout wasand heads for the Senate. The White House said it would be the first bill and would be followed by another with investments in long-term efforts such as infrastructure.
However, President Joe Biden did not support a wealth tax during his candidacy and his administration has already indicated that it is considering other options to pay the costs of future investments. Last month Treasury Secretary Janet Yellen said a wealth tax posed “very difficult implementation problems.” On several occasions, she and other officials in the Biden administration have instead discussed examining the corporate tax rate and loopholes.
At the same time, passing a wealth tax would prove difficult in the Senate. The Ultra-Millionaire Tax Law is co-sponsored by Democratic Senators Bernie Sanders, Sheldon Whitehouse, Jeff Merkley, Kirsten Gillibrand, Brian Schatz, Ed Markey and Mazie Hirono. But with the house split 50-50 along party lines, securing a majority, let alone 60 votes, could prove to be a challenge. Warren called for the removal of the filibuster, saying the procedural mechanism for delaying or blocking a vote gives veto power to Senate Minority Leader Mitch McConnell.
The number of countries applying wealth taxes has declined over the past 30 years. In 1990, 12 European countries had wealth taxes, but by 2018 that number had fallen to three. Economists note that there are multiple challenges associated with estimating the income that a wealth tax would generate in part because of the way assets are valued.
“From an equity perspective, from a tax burden perspective, this can be very attractive. A large amount of money affects relatively few taxpayers, who are all at the top of the wealth distribution,” he said. said Janet Holtzblatt, senior fellow at the Urban-Brookings Center for Tax Policy. “But it can have negative spillover effects if it hurts the economy, if it hurts investment, and it may not have as strong an effect as advocates want because of the ways to avoid and d ‘evade a tax. “
The ultra-millionaire tax law as proposed includes several provisions to block tax evasion, including a $ 100 billion investment in the Internal Revenue Service, a minimum verification rate of 30% for taxpayers subject to the tax and a so-called 40% exit tax on the net. worth more than $ 50 million of Americans who renounce their citizenship in an attempt to evade payment of the tax.
“For any good tax, you want it to be able to function without having these extremely strict measures to prevent evasion,” said Foundation Tax economist Daniel Bunn. “If you need that type of penalty rate to avoid avoidance, then I would say you’re probably designing the wrong tax to begin with.”
Bunn also notes that a wealth tax could cause foreign investors to replace local billionaires as owners of capital.
“If you reduce the return on wealth for US citizens, and you don’t have something similar for high net worth individuals investing in the US, you end up changing the ownership structure of US assets,” said Bunn. So instead of US citizens owning a large chunk of assets in the United States – be it homes, stocks, or other assets – you are essentially creating a preference for foreign ownership through of the tax code. “
But the idea of a wealth tax has broad support in the United States. A Reuters / Ipsos poll last year found that nearly two-thirds of Americans either strongly or somewhat agree that the very rich should contribute more.