Elizabeth Warren wasn’t the only one pushing back on Bill Gates’s comments about her wealth tax proposal. The New York Times Editorial Board notes that tax rates were considerably higher when Gates founded Microsoft in 1975, and that didn’t stop Gates from building his business or attracting investors.
“Let’s get a few things straight,” The Times editorial says. First, the wealthiest Americans now face a much lighter tax burden than they have in the past:
“In 1961, Americans with the highest incomes paid an average of 51.5 percent of that income in federal, state and local taxes. Half a century later, in 2011, Americans with the highest incomes paid just 33.2 percent of their income in taxes, according to a study by Thomas Piketty, Emmanuel Saez and Gabriel Zucman published last year. Data for the last few years is not yet available but would likely show a relatively similar tax burden.”
Second, federal tax receipts as a share of gross domestic product have been falling over the past few years:
“The federal government needs a lot more money. Decades of episodic tax cuts have left the government deeply in debt: The Treasury is on pace to borrow more than $1 trillion during the current fiscal year to meet its obligations. The government will need still more money for critical investments in infrastructure, education and the social safety net.”
That doesn’t mean that Warren’s wealth tax is necessarily the answer, and the Times editorial makes clear it is not an endorsement of her specific plan, saying that it and a similar proposal from Bernie Sanders “require careful consideration” as part of a debate over how much money the government needs and how best to generate that revenue. But raising taxes on the rich will be necessary, and there’s little evidence “that tax increases of the magnitude proposed by Ms. Warren and other candidates for the Democratic presidential nomination would meaningfully discourage innovation, investment or economic growth.”
In any case, cutting taxes hasn’t delivered the innovation, investment and growth that were promised:
“Congress has slashed taxation three times in the past four decades, each time for the stated purpose of spurring innovation and investment and growth. Each time, the purported benefits failed to materialize. President Trump initiated the most recent experiment in 2017. The International Monetary Fund concluded in a recent report that it had not worked.”