In the latest of a series of policy proposals meant to define her presidential campaign, Sen. Elizabeth Warren (D-Mass.) has debuted a plan for a wealth tax on the super-rich. This is an idea that is somewhat controversial.
This comes just as the economy may be heading for a downturn and President Trump has provoked a government shutdown that is causing enormous hardship to hundreds of thousands of government workers, not to mention the millions of people in the private sector who depend on them.
And because it’s just in their nature, Trump and the people who work for him are doing their part by acting like some kind of absurd parody of heartless plutocrats. Here are some of the things they’ve said recently:
- Trump economic adviser Kevin Hassett said that the shutdown is actually great for federal workers because it's like getting a vacation, despite the fact that many can't pay their rent or mortgage and are lining up at food banks. "And then they come back and then they get their back pay, then they're, in some sense they're better off."
- Commerce Secretary Wilbur Ross, a man worth several hundred million dollars, was asked about federal employees going to food banks, and said, “I know they are, and I don’t really quite understand why,” because they could just go get a loan.
- Larry Kudlow, Trump’s chief economic adviser, was asked about Ross’s comments and said that his own employees seem fine. “I’ve met with my individual staff members, and god bless ‘em, they’re working for free, they’re volunteering.”
- Asked about Ross’s comments, President Trump said, “I think what Wilbur was trying to say is that they will work along. I know banks are working along. If you have mortgages, the mortagees, the mortgage, the folks collecting the interest and all of those things, they work along. That’s what happens in time like this. They know the people, they’ve been dealing with them for years, and they work along, the grocery stores.”
It’s unclear whether Trump has set foot in a grocery store in the past 50 years, but he apparently thinks that all the little people in America live in Mayberry, where you can just ask the Gary the grocer or Bob the banker to put it on your tab and know that he’ll let you slide for a month or two. I invite you to try that at your local Safeway or with your mortgage lender and see how it goes.
Warren couldn't have asked for a better argument in favor of a wealth tax.
To summarize her proposal briefly, it would tax wealth (assets minus debts) over $50 million at 2 percent; over $1 billion would taxed at 3 percent. The tax would only hit a tiny sliver of the super-rich (about 75,000 families) and according to her would generate $275 billion a year.
Some liberal economists are cheering Warren’s proposal (Jared Bernstein makes a case for it here), but others are more skeptical. For instance, Dean Baker of the Center for Economic and Policy Research, argues that the wealth tax in France only takes in one-fifth of what it should be taking in, due to the super-rich employing tax evasion schemes that end up relieving them of around 80 percent of their actual tax liability. In an email to me, Baker suggested that something similar would probably happen in the United States, which would be very damaging:
That is a really bad story. In addition to the lost revenue, we are creating a huge tax shelter industry, which itself makes many people rich, and is a complete waste from an economic standpoint. More importantly, widespread tax avoidance/evasion undermines support for the system. We always rely to a large extent on voluntary compliance. If people see the rich not paying their taxes, they will also look to find ways to avoid taxes.
Chris Hayes raised the issue of avoidance with Warren, and she insisted that she had already considered the possibility, and addressed it in the proposal by taxing assets wherever they are in the world (so you couldn’t just move everything to a Cayman Islands shell company); including aggressive auditing to make sure the rich can’t get away with evasion; and providing few if any exceptions or loopholes.
It's hard to know for sure how effective those measures would be. But it might be better to think of Warren's proposal as less something that's likely to be implemented any time soon and more as a statement of values.
One of the things Warren has done is force conservatives to respond to her, and naturally they’re appalled at the suggestion; turn on Fox News or go to conservative websites today and you’ll see it denounced. As an economist from the Heritage Foundation put it, Warren’s proposal “really comes down to the politics of envy and whether or not we should be increasing taxes on the wealthy more than they already are.” You can call it the politics of envy or the politics of fairness, but after the Republicans passed a gigantic tax cut for the wealthy and corporations, it’s good politics.
The conservative criticism is undoubtedly just fine with Warren; she’s more than happy to have a bunch of Republicans spend their time vigorously defending the wealthy against the prospect of higher taxes. Nothing could better make the case for her presidential candidacy, which is centered on a story in which political and economic power support and feed each other: The wealthy use their money to persuade politicians to shape the economic system to enable them to amass even more wealth, which gives them more money to influence politics, which enables them to get richer, and on it goes.
Step back, and this all looks like it was exactly the debate Warren wants. The administration is demonstrating that it has no idea what kind of economic challenges ordinary people face, even as Republicans are arguing for low taxes on the wealthy. But a recent report from the Federal Reserve stated that “Four in 10 adults, if faced with an unexpected expense of $400, would either not be able to cover it or would cover it by selling something or borrowing money.” At the same time, we keep hearing stories like the one about the hedge fund billionaire who just paid a record $238 million for an apartment in Manhattan, in a building that “was built after the landlord evicted dozens of middle class tenants from their rent-stabilized apartments.”
Seems like a pretty good time for Democrats to be talking about their commitment to fighting economic inequality.