Elizabeth Warren Escalates Her Battle With Billionaires

Elizabeth Warren Escalates Her Battle With Billionaires

Printer-friendly version
Plus, tax breaks for a superyacht marina
Thursday, November 14, 2019

Elizabeth Warren Escalates Her Battle With Billionaires

Elizabeth Warren’s proposed wealth tax has ruffled quite a few feathers among America’s billionaire class, and her rhetorical battle with the superrich entered a new phase this week when investor Leon Cooperman directed some choice words at the Massachusetts senator.

“In my opinion she represents the worst in politicians as she’s trying to demonize wealthy people because there are more poor people than wealthy people,” Cooperman told CNBC. “She’s disgraceful. She doesn’t know who the f--- she’s tweeting. I gave away more in the year than she has in her whole f----ing lifetime.”

Cooperman’s latest comments were spurred by a new campaign ad from Warren that calls out the hedge fund manager for resisting her call for a wealth tax. The ad, which also names former CEO of TD Ameritrade Joe Ricketts, former Goldman Sachs CEO Lloyd Blankfein and tech investor Peter Thiel, is scheduled to play on CNBC, in what appears to be a deliberate attempt to troll the investing class that has recoiled with horror from Warren’s tax proposals.

The Warren campaign doesn’t seem to mind the attention, though. It responded to Cooperman’s comments with a play on the “OK boomer” meme that quickly made its way across social media, providing more free advertising for Warren while burnishing her progressive credentials among Democratic voters. “Psst, rich guys,” said Vox’s Emily Stewart, “It might be better for you if you stop talking about Elizabeth Warren.”

Would Warren’s wealth tax hurt the economy? A preliminary analysis by the Penn Wharton Budget Model found that a wealth tax similar to Warren’s would slow economic growth by nearly 0.2 percentage points a year over a decade, due in large part to a reduction in investment as wealthy people increase their consumption in response to higher taxes on their assets.

“The wealth tax shrinks the economy because saving is more expensive,” Richard Prisinzano, Penn Wharton’s director of policy analysis, told Jim Tankersley of the New York Times. “The results also suggest that the negative effect of the tax increases as the tax rate increases.”

The analysis made some unusual assumptions, however, including the idea that the revenues from the wealth tax would be used to pay down the national debt, something Warren hasn’t proposed. That assumption actually improved the performance of the wealth tax in the Wharton model, though many economists would disagree on the implications for growth of debt reduction.

Further, critics say the Wharton analysis ignores one of the most significant features of Warren’s proposal, namely the big increase in public spending that could boost economic growth overall — another idea in economics that is subject to serious debate. “If the government collects $3 trillion in wealth tax revenue, and spends $3 trillion on public infrastructure, it’s unclear that there should be a reduction” in total investment in the economy, said Gabriel Zucman, the University of California at Berkeley economist who has advised Warren on her tax proposals.

‘Medicare for All’ Is a Loser at the Polls: Study

Democratic House candidates who supported Medicare for All in the 2018 midterm elections fared considerably worse than those who did not back the plan, according to a new analysis by Alan I. Abramowitz at Sabato's Crystal Ball, a political newsletter run by the University of Virginia Center for Politics.

Democrats who supported Medicare for All in competitive districts in 2018 won 45% of their races compared with 72% for those who did not support the health-care overhaul. Even controlling for other variables that affected the races, Democrats who endorsed Medicare for All “did significantly worse vthan those who did not,” Abramowitz writes, and the gap was large enough to have affected the outcome of some elections.

“It is possible that the estimated effect of Medicare for All was a byproduct of other differences between supporters and non-supporters. For example, supporters might have taken more liberal positions on a variety of other issues as well as Medicare for All,” Abramowitz concludes. “Even if that is the case, however, these findings are not encouraging to supporters of Medicare for All. They indicate that candidates in competitive races who take positions to the left of the median voter could get punished at the polls.”

Tax Break for Poor Neighborhoods Is Helping Build a Superyacht Marina

The 2017 Tax Cuts and Jobs Act created special “opportunity zones” that give investors generous tax breaks in exchange for investing in low-income neighborhoods. The purpose of the tax law is “to spur economic development and job creation in distressed communities,” according to the IRS, but critics say that they are ripe for abuse, as when developers in already gentrifying areas use the tax breaks to build luxury housing they probably would have built anyway.

ProPublica examined one such apparent abuse, which arose after state officials in Florida, prompted by some lobbying from a prominent donor to then-Florida Gov. Rick Scott, a Republican, designated a waterfront area as an opportunity zone. The beginning of the piece gives a sense of what happened next:

“The Rybovich superyacht marina lies on the West Palm Beach, Florida, waterfront, a short drive north from Mar-a-Lago. Superyachts, floating mansions that can stretch more than 300 feet and cost over $100 million, are serviced at the marina, and their owners enjoy Rybovich’s luxury resort amenities. Its Instagram account offers a glimpse into the rarefied world of the global 0.1% — as one post puts it, ‘What’s better than owning a yacht, owning a yacht with a helicopter of course!’

“Rybovich owner Wayne Huizenga Jr., son of the Waste Management and Blockbuster video billionaire Wayne Huizenga Sr., has long planned to build luxury apartment towers on the site, part of a development dubbed Marina Village.

“Those planned towers, and the superyacht marina itself, are now in an area designated as an opportunity zone under President Donald Trump’s 2017 tax code overhaul, qualifying them for a tax break program that is supposed to help the poor.”

Read the full report at ProPublica.

Quote of the Day

“We have no intention of having a shutdown. I think everybody intends to keep the government open.”

– Treasury Secretary Steven Mnuchin, after meeting with House Speaker Nancy Pelosi and congressional appropriators, according to The Hill. Lawmakers have agreed to pursue a second stopgap spending bill to fund the government through December 20, with the House slated to vote on the measure next week. Congressional negotiators have also agreed to work toward a solution on top-line allocations for federal agencies by Wednesday, leaving more contentious details including funding for Trump’s border barriers for later, The Hill’s Niv Ellis reports.

Sanders and Ocasio-Cortez Introduce Green New Deal Bill for Public Housing

Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez on Thursday introduced legislation calling for an investment of up to $180 billion over 10 years to eliminate carbon emissions from public housing.

The bill, called the Green New Deal for Public Housing Act, represents the first attempt at turning the broad framework of the environmental and economic plan introduced earlier this year by Ocasio-Cortez and other lawmakers into specific legislation, The Washington Post says.

“Faced with the global crisis of climate change, the United States must lead the world in transforming our energy system away from fossil fuel to sustainable energy,” Sanders said in a statement. “But let us be clear: as Congresswoman Ocasio-Cortez understands, the Green New Deal is not just about climate change. It is an economic plan to create millions of good-paying jobs, strengthen our infrastructure, and invest in our country’s frontline and vulnerable communities.”

Read more at The Washington Post.

Biden Proposes $1.3 Trillion Infrastructure Plan

Joe Biden on Thursday put out a $1.3 trillion infrastructure proposal. The 10-year “Plan to Invest in Middle Class Competitiveness” calls for investments to revitalize the nation’s roads, highways and bridges, speed the adoption of electric vehicles, launch a “second great railroad revolution” and make U.S. airports the best in the world.

“The infrastructure plan Joe Biden released Thursday morning is heavy on high-speed rail, transit, biking and other items that Barack Obama championed during his presidency — along with a complete lack of specifics on how he plans to pay for it all,” Politico’s Tanya Snyder wrote. Biden’s campaign site says that every cent of the $1.3 trillion would be paid for by reversing the 2017 corporate tax cuts, closing tax loopholes, cracking down on tax evasion and ending fossil-fuel subsidies.

Read more about Biden’s plan at Politico.

Trump Aims Even Lower With His Drug-Pricing Proposal

President Trump wants to get more aggressive on lowering some Medicare drug prices.

The Trump administration last year proposed using an index of international drug prices to set prices for certain drugs under Medicare. The proposal would have lowered some prices by 30% relative to where they are now, but would have still left them higher than they are in other developed countries, with a target price set at 126% of the international average.

That wasn’t good enough for Trump, who wants the U.S. to be paying less than other countries, Health and Human Services Secretary Alex Azar said Wednesday. “His view, which he has articulated publicly, is that America ought to be getting the best deal among developed countries,” Azar said at an event hosted by Axios. “And so that's the type of proposal we're working on.”

Trump had said in July that he was planning an executive order setting up “most favored nation” status for the United States on drug prices, but Azar said Wednesday that the plan would take the form of a regulatory proposal from his department.

Dueling plans: The Trump proposal would set an even lower benchmark than what congressional Democrats have proposed, Axios’s Catlin Owens notes. Pelosi’s bill would allow Medicare to negotiate some drug prices with manufacturers and set a ceiling of 120% of what other countries pay, with those prices also applying to private insurance plans. But the White House last week rejected House Speaker Nancy Pelosi's drug pricing bill, calling it “unworkable.” The administration’s proposal, by contrast, would only lower prices for physician-administered drugs under Medicare and would not extend those savings to drugs sold at the pharmacy counter or covered by private insurance.

The bottom line: It’s not clear if or when the administration proposal might be finalized. The idea of an international price index already faced pushback from Republican lawmakers and the pharmaceutical industry, and a lower target price will only stiffen the opposition. “The lower target price is obviously a change for the worse from industry’s perspective,” Cowen Washington Research Group analysts wrote in a note to clients. “However, in the absence of other changes to enforce the ‘target price,’ it remains highly uncertain whether the proposal could ever actually be implemented in the US.”

It's almost Friday! Send your tips and feedback to yrosenberg@thefiscaltimes.com. Follow us on Twitter: @yuvalrosenberg, @mdrainey and @TheFiscalTimes. And please tell your friends they can sign up here for their own copy of this newsletter.


Views and Analysis