With U.S. Democrats jockeying to see who will challenge President Donald Trump in 2020, raising taxes on the rich is emerging as a central theme for a party being pulled to the left by its invigorated self-described progressive wing. Ideas include a “wealth tax” on assets, much higher income tax rates on the biggest earners and a new tax on financial trades, all in the name of raising more money for new government programs while making a dent in rising inequality.

1. What are the proposals?

They mainly fall into five categories:

• START TAXING WEALTH, not just income. Massachusetts Senator Elizabeth Warren would put a 2% annual tax on household wealth in excess of $50 million, rising to 3% on every dollar above $1 billion. Vermont Senator Bernie Sanders would start lower, with a 1% tax on households worth at least $32 million that graduates to an 8% levy on wealth above $10 billion. Former hedge fund manager Tom Steyer also advocates a 1% tax on wealth exceeding $32 million.

• RAISE TAX RATES ON INCOME for the biggest earners. New York Representative Alexandria Ocasio-Cortez, a prominent progressive who is not a presidential candidate, has floated taxing income above $10 million at 70%, up from the current top 37% tax rate that kicks in above $500,000.

• TAX FINANCIAL TRADES. Sanders proposes a tax of 0.5% on stock trades, 0.1% on bond trades and 0.005% on derivatives transactions.

• TAX MORE INHERITANCES. Sanders would expand the estate tax so it covers holdings left at death by the wealthiest 0.2% of Americans, applying a rate of as much as 77% on the value of estates above $1 billion. He’d lower the level at which the tax kicks in to cover estates valued at $3.5 million or above, down from the current $11 million.

• TAX CAPITAL GAINS like ordinary income. Investors are taxed on the difference between what they paid for a stock or property and what they sold it for. The federal rate in the U.S. currently tops out at 20%, well below the top marginal rate of 37% on wages and salaries. Former Vice President Joe Biden would double the capital gains rate to 40% for taxpayers earning more than $1 million annually.

2. Who would be hit?

Primarily the richest of the rich -- only a fraction of the top 1% of households, in the case of some of these proposals. Warren’s tax would hit the wealthiest 75,000 households, for instance, while a 70% top rate as proposed by Ocasio-Cortez would hit the top 0.01% of earners, according to IRS data. (Even then, some people who have most of their income tied to the capital gains from investments could escape the higher rate.) Sanders says his estate tax would apply to the wealthiest 0.2% of Americans. Financial transactions taxes would fall most heavily on high-frequency traders, while annual taxes on derivatives, a proposal known as mark to market, would hit investors, including hedge funds, but some plans limit the tax hit for pension funds, insurance contracts and college endowments.

3. How much would such taxes raise?

Warren’s would raise $2.75 trillion over a decade, according to University of California-Berkeley economists Emmanuel Saez and Gabriel Zucman, who helped prepare her plan. That’s a significant sum for a tax proposal -- almost enough to pay for Trump’s $1.5 trillion tax cut, two times over -- but the figure has been challenged by some economists as overoptimistic. Sanders says his tax package would raise $4.35 trillion over the next decade. By one count, the 70% tax could raise $353 billion over a decade; others say that depending how it’s designed, it could raise as little as $51.4 billion because of the tax maneuvering it would trigger. It’s estimated that a financial-transaction tax set at 0.1% of the value of a securities trade would raise $777 billion over a decade, while an annual tax on derivatives would generate $18.7 billion in a 10-year period.

4. What would wealth taxes do for inequality?

That’s hotly debated. Targeting what people have, rather than what they earn, is generally seen as a more potent way to redistribute wealth, because wealth inequality is greater than income inequality. Some new research also suggests that raising tax rates wouldn’t reduce inequality much, because much of the wealth among the richest Americans stems from private business profit taxed at lower rates and from assets that have grown in value but go un-taxed until they are sold.

5. What’s the argument for raising taxes on the rich?

Democrats argue -- and polling suggests an increasing number of voters agree -- that the government should use the tax code to redistribute wealth downward. Since the Republican tax cuts passed in 2017 gave the highest income taxpayers a larger proportion of reductions, they say the first order of business is to reverse that trend. They also favor increasing overall tax revenues to pay for an ambitious agenda on health care, higher education and action to limit climate change.

6. What do opponents say?

That it would be an administrative nightmare to require taxpayers or the IRS to calculate annually the value of assets, including real estate and investments in private businesses that are notoriously hard to assess. Senator Cory Booker of New Jersey, another Democratic presidential hopeful, has criticized Warren’s proposed wealth tax as “cumbersome,” while Ocasio-Cortez has raised doubts about whether Democrats would actually support such legislation. The richest Democratic candidate, former New York City Mayor Michael Bloomberg, says he would raise taxes on “wealthy people like me” but opposes directly taxing wealth, as Warren and Sanders propose, because “it just doesn’t work.” (Bloomberg is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.) Other critics say that taxes on financial trades would make capital more expensive for companies, meaning they’d raise less of it. Such a tax could also reduce liquidity in markets, opponents say. More broadly, they say, high taxes on income and on accumulated wealth would discourage innovation and investment.

7. Is this a U.S.-only thing?

Many European nations have experimented with a wealth tax of some form, with support ebbing and flowing throughout the decades. Thomas Piketty’s 2014 book “Capital in the Twenty-First Century” re-invigorated the debate particularly in European countries with high debt loads, which have eyed wealth taxes as ways to replenish their treasuries. Spain effectively abolished its wealth tax in 2008 but brought it back in 2011, and efforts are again under way to repeal it. French President Emmanuel Macron’s 2017 decision to exempt financial holdings from a longstanding wealth tax contributed to the anger that set off the so-called Yellow Vest protests a year later. Neither Germany nor the U.K. has a wealth tax, but there’s debate within both countries about creating one. In Asia, where inequality has been rising especially rapidly, some countries that aren’t strapped for cash, such as Singapore, are considering increases in taxes on large property holdings as a way of putting a lid on inequality. China’s push to cut taxes for its middle class has led to expectations that the government will squeeze more from its growing ranks of affluent households.

--With assistance from Peter Coy and Mark Niquette.

To contact the reporter on this story: Laura Davison in Washington at ldavison4@bloomberg.net

To contact the editors responsible for this story: Wendy Benjaminson at wbenjaminson@bloomberg.net, John O’Neil

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