What Warren’s Wealth Tax Would Do to Billionaires

What Warren’s Wealth Tax Would Do to Billionaires

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Plus, Sanders and Buttigieg release plans for VA
Monday, November 11, 2019

Elizabeth Warren’s Wealth Tax Isn’t Just About Raising Revenue

Elizabeth Warren says her wealth tax — 2% on household wealth over $50 million, rising to 6% on household wealth over $1 billion — would raise trillions of dollars to pay for new social programs, including universal child care, student loan forgiveness and, at least in part, Medicare for All.

But a wealth tax would do more than just raise revenues, Patricia Cohen pointed out in The New York Times on Sunday. It would also limit the growth of some of America’s greatest fortunes and even shrink them in the long run, reducing the intergenerational transfer of wealth. “Over time,” Cohen wrote, “billionaires would have many fewer billions.”

Gabriel Zucman, the University of California at Berkeley economist who has advised both Warren and Bernie Sanders on their tax plans, told Cohen that the reduction of great fortunes was very much part of the plan. “You had a good idea at 30, that's great, you can be a multibillionaire for 10 to 20 years,” Zucman said. “What an annual wealth tax of 6 percent does is that it makes it harder to stay a multibillionaire at age 70, 90, etc. It makes wealth circulate.”

According to an analysis by Zucman and fellow economist Emmanuel Saez, if the wealth tax had been in effect since 1982, the 400 wealthiest people on the annual Forbes list would have a net worth of $3.1 billion each on average, compared to the current average net worth of $7.2 billion each. Some specific examples from Zucman’s analysis of the effects of a wealth tax:

  • Microsoft’s Bill Gates would have had $13.9 billion in 2018, instead of $97 billion.
  • Amazon’s Jeff Bezos would have had $48.8 billion in 2018, instead of $160 billion.
  • Facebook’s Mark Zuckerberg would have $32.5 billion in 2018, instead of $61 billion.

It’s not just a wealth tax, though: Warren has also proposed a higher tax on capital gains, and that’s the one that should really worry billionaires, says Erik Sherman at Forbes. Sherman does some basic calculations on wealth taxes of 3% and 6% and finds that most great fortunes would continue to grow at those tax rates. But if Warren’s near doubling of the capital gains tax from 20% to 37% were in effect, some billionaires would see their fortunes shrink by half or more. Looking at the period 2010-2019, and including Warren’s taxes on wealth and capital gains, Sherman found, for example, that Jeff Bezos’s $131 billion fortune would fall to $37.2 billion.

Number of the Day: 18 Million

There were 18 million military veterans in the United States in 2018, according to the Census Bureau. That figure includes 485,000 World War II vets, 1.3 million who served in the Korean War, 6.4 million from the Vietnam War era, 3.8 million from the first Gulf War and another 3.8 million since 9/11. We join with the rest of the country today in thanking them for their service.

Sanders, Buttigieg Release Plans for Veterans

To mark Veterans Day, Bernie Sanders on Monday unveiled a proposal to expand services provided by the Department of Veterans Affairs. Among numerous policy details in the proposal, Sanders said he would:

  • Fill 50,000 currently empty positions at the VA in his first year.
  • Spend $62 billion to repair and modernize VA facilities.
  • Increase wages, staffing ratios and worker protections at VA facilities.
  • Provide dental care to all former servicemembers.
  • Expand mental health and suicide prevention services.
  • Guarantee housing for veterans.

“As a nation, we have a moral obligation to provide the best quality care to those who put their lives on the line to defend us,” Sanders said in a statement. “Just as planes and tanks and guns are a cost of war, so is taking care of the men and women who we sent off to fight the wars.”

Rival Democratic presidential candidate Pete Buttigieg also released a plan for the VA Monday, in which he said he would increase funding for veterans, streamline access to medical care and improve mental health services. Buttigieg addressed the plight of current servicemembers as well, saying he would improve child care on military bases, bring more women into leadership roles and end the transgender military ban.

For more details, see Sanders’ proposal here and Buttigieg’s proposal here.

A Dam Big Problem

A more than two-year-long investigation by the Associated Press has identified 1,688 dams across 44 states and Puerto Rico that are in poor or unsatisfactory condition and could result in life-threatening floods if they fail.

AP’s David A. Lieb, Michael Casey and Michelle Minkoff write that the actual number is likely higher: “Some states declined to provide condition ratings for their dams, claiming exemptions to public record requests. Others simply haven’t rated all their dams due to lack of funding, staffing or authority to do so.”

The Association of State Dam Safety Officials estimates that it would cost more than $70 billion to repair and modernize the more than 90,000 dams in the United States. “But unlike much other infrastructure,” the AP reporters explain, “most U.S. dams are privately owned. That makes it difficult for regulators to require improvements from operators who are unable or unwilling to pay the steep costs.”

Read the full Associated Press report.

A Third Round of Farm Bailouts?

President Trump’s trade wars are hurting U.S. farmers, but Agriculture Secretary Sonny Perdue is working to keep them from getting more frustrated even as he promotes President Trump’s agenda, The Washington Post’s Annie Gowen and William Wan report:

"Perdue could have some welcome news for this key constituency that helped elect Trump — a third round of bailout payments on top of the more than $26 billion already being spent.

"Two economists at the U.S. Department of Agriculture, who spoke on the condition of anonymity because they were not authorized to speak publicly, said a third round of payments for farmers increasingly is seen as inevitable, particularly if a trade deal with China is not reached soon. The amount has not been determined.

"Perdue said Thursday he was ‘hopeful’ that the pending trade deal would ‘supplant any type of farm aid needed in 2020.’ But a third round of aid could be crucial to shoring up Trump’s support in rural America as the election looms, analysts say."

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