By Alan Rappeport and Thomas Kaplan
The New York Times, October 1, 2019
Progressive Democrats are advocating the most drastic shift in tax policy in over a century as they look to redistribute wealth and chip away at the economic power of the superrich with new taxes that could fundamentally reshape the United States economy.
As they compete for the Democratic presidential nomination, Senators Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont have proposed wealth taxes that would shrink the fortunes of the richest Americans. Their plans envision an enormous transfer of money from the wealthy to ordinary people, with revenue from the wealth tax used to finance new social programs like tuition-free college, universal child care and “Medicare for all.”
Income inequality has surged in the United States in the last 50 years, with the top 0.1 percent now controlling about a fifth of the nation’s wealth. That concentration of wealth has coincided with stagnant wages, rising college costs and the lingering effects of the Great Recession, which erased trillions of dollars in household wealth, ravaging the middle class. New figures from the Census Bureau released last week show that income inequality in the United States reached its highest level last year since the government began tracking it in 1967.
Polls have found widespread support for the idea of taxing wealth. A poll conducted for The New York Times by the internet research firm SurveyMonkey this summer found that two-thirds of Americans, including a majority of Republicans, backed a 2 percent tax on households worth over $50 million, which is the heart of Ms. Warren’s plan.
The tax proposed by Ms. Warren would apply to households worth over $50 million. She would impose a 2 percent tax on net worth above $50 million, and a 3 percent tax on net worth above $1 billion.
The plan from Mr. Sanders would apply to a larger number of households, and it would be particularly aggressive on billionaires. His tax would start out at 1 percent on net worth from $32 million to $50 million for married couples, and it would top out at 8 percent on net worth over $10 billion.
Emmanuel Saez and Gabriel Zucman, the two University of California, Berkeley, economists who helped Ms. Warren and Mr. Sanders develop their plans, project that Ms. Warren’s proposal would hit about 70,000 households and generate $2.6 trillion in revenue for the federal government over a decade. They project that Mr. Sanders’s proposal would apply to 180,000 households and raise $4.35 trillion over 10 years.
Mr. Zucman said in an interview that he believes a wealth tax would have a modest but positive impact on growth. By reducing the power of the wealthiest, he argued, it would make markets more competitive and spur innovation.
Comparison of the Warren and Sanders wealth tax proposals, by Emmanuel Saez and Gabriel Zucman, University of California, Berkeley:
“Progressive wealth taxation” by Emmanuel Saez and Gabriel Zucman, Brookings Papers on Economic Activity:
By Don McCanne, M.D.
In the discussions of the single payer model of Medicare for All you frequently hear, “How are we going to pay for it?” – almost as if it is an unanswerable question. Well, the short answer is that our current national health expenditures are already enough to pay for such a system – comprehensive health care for everyone.
What is not working is the distribution of payments into the system. For perspective, annual premiums for employer-sponsored family health insurance are now over $20,000 whereas median household income is about $62,000. Clearly the typical family cannot afford to pay an equally allocated share of our nation’s health expenditures. Yet the money is there; it’s just that it has been distributed upwards with stagnant incomes for most of us and rapidly rising income and wealth for those at the top.
The work of Piketty, Saez and Zucman has shown that equitable financing of government functions can no longer depend on progressive income taxes alone, but now must include progressive wealth taxes, but without the need to tax the first tens of millions of personal wealth. It is difficult to be sympathetic towards the billionaire who would pay no wealth taxes on the first 30 to 50 million dollars of wealth and with progressive tax rates not exceeding a single digit on the remaining wealth. Since the productivity gains of the workers have flowed mostly to the top, along with the economy’s rents, progressive wealth taxes are essential if we are to return to the people some of these superabundant surpluses of the plutocrats. No plutocrat will be deprived of an evening aperitif or other favored indulgences.
Besides progressive income taxes and progressive wealth taxes, there are other equitable sources of revenues that could be used to help fund Medicare for All. An example is a Tobin tax on equity trades, taxing the gamblers who trade frequently, often with large profits that may have a negative impact on individual 401(k) and IRA retirement accounts. Basically these various equitable – fair – revenues would be used to fund a universal, national risk pool that would make health care affordable for everyone.
Some in the single-payer movement have even been reluctant to use the word “tax.” That’s wrong. It is equitable taxes that would make health care affordable for absolutely everyone. Why should you try to dodge that?
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