Wealth Tax Pioneer: Warren's Wealth Tax Would Have Hardly Any Effect on Equality
One of the hallmarks of Democratic Massachusetts Sen. Elizabeth Warren’s 2020 presidential campaign (aside from repeated examples of blatant dishonesty) is her incessant attacks against the wealthiest people in this country.
Warren has framed her attacks as being based on a concern over inequality in income and wealth. But in all likelihood, the reality of the situation is that Warren, like many others on the progressive left, is driven more by envy and greed than a true concern over inequality.
In fact, a December study of the senator’s proposed wealth tax — by a liberal economist highly in favor of taxing the wealthy — showed that Warren’s proposal would actually do very little, if anything, to address the level of economic inequality in this nation.
Sen. Warren has proposed a wealth tax that would impose an additional 2 percent tax on wealth in excess of $50 million, with an extra 1 percent surcharge — 3 percent overall, on top of existing tax rates — on accumulated wealth in excess of $1 billion.
In the minds of Warren and her progressive supporters, this extra tax on the wealthy would somehow bring in enough extra revenue to the federal government to redistribute to the less wealthy 99 percent of the country and supposedly substantially reduce the measure of inequality in terms of income and total wealth.
According to economist Edward Wolff, however, Warren’s plan would do next to nothing to actually address economic inequality. The tax would not bring in a substantial amount of revenue and could, in fact, backfire by prompting the wealthy to flee the nation with their wealth to avoid paying the tax.
In his paper published by the National Bureau of Economic Research, Wolff studied Warren’s wealth tax proposal alongside a similar Swiss wealth tax. He found that both fell far, far short of achieving the desired end result of impacting wealth inequality, at least in terms of the common unit of measurement for such known as the Gini coefficient.
The Gini coefficient measures the distribution of income and wealth across a society on a scale of zero to one, with zero representing complete equality and one representing complete inequality.
According to the International Organization for Economic Cooperation and Development, or OECD, the U.S., as of 2017, rates a 0.39 in terms of income inequality on the Gini scale.
According to Wolff’s study, Warren’s wealth tax proposal would only actually impact about 0.07 percent of American households and raise approximately $303.4 billion in additional revenue for the U.S. government. Considering that annual spending runs well over $4 trillion, that extra $303 billion is a mere drop in the bucket in the big picture.
Furthermore, even if the entire $303 billion were put toward reducing income and wealth inequality, it would likely only reduce the Gini coefficient by a “miniscule” 0.0005 percent.
In other words, Warren would essentially be confiscating the accumulated riches of wealthy Americans to literally no effect, save for making them less wealthy than they were before, and would do nothing to raise the wealth of the middle and bottom tiers of distribution, where substantial change in the coefficient could actually be made.
Furthermore, it isn’t a given that Warren would be able to achieve even that tiny, near non-existent impact on the Gini coefficient. Her threat of confiscatory taxes on wealth, simply for the sake of being wealthy, could prompt many of America’s wealthy individuals and families to take their money and run to another nation that won’t rob them out of progressive envy and greed.
To be sure, folks like Wolff who support the idea of a wealth tax would probably set the tax rates even higher than the two-to-three percent proposed by Warren, or lower the threshold of income and wealth to include more citizens in that additional tax.
In truth, what Wolff’s study revealed is that Warren’s wealth tax proposal would be an ineffectual half-measure that would do nothing to actually address the problem it is supposedly intended to solve.
Were Warren to drop the pretense and simply come right out and openly admit that her goal is to confiscate wealth from the wealthy, well, then at least she’d be honest about what her plan would actually accomplish.
As for us, we hold true to the notion that the best way to address income and wealth inequality is not to steal from those at the top but to instead implement economic policies that help employ more people, raise wages through market demands, and support small businesses.
That way, income earners and workers at the bottom to middle of the equality scale can more easily increase their income and wealth on their own, without the thieving hands of the federal government being involved.
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