Editors at National Review Online tackle the latest misguided taxation ideas from the political left.
It’s the 2020 Democratic primaries all over again. Just as they were then, progressives are trying to one-up each other with increasingly outlandish fiscal proposals. One of the worst ideas from that year’s frenzied contest — a direct tax on household wealth — is back in fashion.
The same characters are back to reheat old redistribution. Senator Bernie Sanders (I., Vt.) got the ball rolling, outlining a 5 percent annual tax on all billionaires’ net worths. Not to be outdone, Senator Elizabeth Warren (D., Mass.) is more ambitious. Her plan is to tax all household wealth above $50 million at 2 percent each year, with a 1 percent surtax on fortunes over $1 billion. Both senators would use the proceeds not to trim the gaping deficit, of course, but to fund a laundry list of new entitlements.
Although Warren’s wealth tax would be slightly kinder to billionaires, it would apply to far more Americans than Sanders’s plan. Targeting what she calls “ultra-millionaires,” it would hit an estimated 260,000 households. Sanders limits his confiscatory scheme to the 900 or so billionaires in the country, though it would surely discourage more entrepreneurs and investors from joining their ranks.
Like today’s wealth-tax proposals, the federal income tax was originally intended to target only the richest Americans. Less than 1 percent of people paid the income tax when it was enacted in 1913, at a rate of just 1 percent of net earnings. Once the government identifies a revenue source, however, it inevitably expands: Three-fifths of households now owe income tax at marginal rates up to 37 percent.
Warren is expanding the wealth tax before it has even been enacted, but it could swell further. One of the senator’s top influences, the inequality-obsessed economist Thomas Piketty, once floated the idea of taxing household wealth above a threshold as low as $260,000.
