The Democratic presidential candidates split Tuesday night over proposals to impose hefty wealth taxes on the richest Americans, exposing an economic policy divide in the party over the need to close the gap between the super-rich and everyone else.
The intraparty feud comes amid the rapid growth of inequality in the United States, with the 400 richest Americans — representing only 0.00025 percent of the population — tripling their share of the national wealth since the early 1980s. These richest 400 Americans now own as much wealth as the bottom 60 percent.
Warren and Sanders have called for attacking that growth in inequality with a tax on the accumulated assets of the wealthy, while the other presidential candidates have proposed more modest measures such as increasing taxes on the capital income of investors.
The wealth tax proposals would represent a sweeping transformation of how taxes are assessed in America, pivoting away from more traditional Democratic tax plans that target new sources of income.
In response to growing inequality and the leftward drift of the party, left-leaning economists have increasingly pushed a wealth tax that would, at least in the case of Sanders’s proposal, substantially reduce the fortunes of multibillionaires such as Bill Gates and Warren Buffett.
“This is the only way to actually not just slow the increase of wealth inequality but to substantially reduce it,” said Peter Gowan, a policy expert at the Democracy Collaborative, a left-leaning think tank, who supports the idea. “With the exception of Warren and Sanders, most Democratic proposals deal with what’s coming into people’s pocketbook — but not the stock of wealth people have already accumulated, which is way too much already.”
The debate reflected the rising prominence of the idea of a wealth tax, as both Warren and Sanders have forced the other candidates to respond to their plan.
“Two years ago, nobody was talking about wealth taxes. And now it’s the core new idea that everybody at least has to respond to, if not adopt, on the Democratic side,” said Michael Linden, a tax expert at the Roosevelt Institute, a left-leaning think tank.
But the wealth tax has also sparked criticism, including from some of the other Democratic presidential candidates. Opponents say the wealthy will figure out strategies to avoid paying a wealth tax. Critics have pointed out that European countries have found it difficult to administer, with more than a dozen countries abandoning it amid reports that it failed to raise as much revenue as expected.
The dispute sparked spirited exchanges Tuesday night, as Warren responded to criticisms of the wealth tax by Sen. Amy Klobuchar (D-Minn.) by asking, “Why is it does everyone else on this stage think it is more important to protect billionaires than it is to invest in an entire generation of Americans?”
Joe Biden, the former vice president who has stopped short of calling for a wealth tax but is seeking higher taxes on wealthy investors, quickly interjected: “No one is supporting billionaires.”
Biden has proposed raising capital gains taxes on millionaires and eliminating a loophole that allows heirs to receive capital gains tax-free, according to his campaign, but has not embraced measures that would raise as much money as the wealth tax pitched by Sanders and Warren.
Warren’s plan calls for levying a 2 percent tax on wealth above $50 million, as well as a 3 percent tax on wealth above $1 billion. She has said it would raise about $2.75 trillion over 10 years, although some economists give lower estimates. Warren said she would use that money to implement a universal child-care program, tuition-free public colleges and universities, and student debt elimination for most borrowers.
Sanders would hit more people with his wealth tax plan, and would also significantly increase how much it would take from the very wealthiest.
Sanders’s plan, which he says would help reduce the billionaire class in America, introduces a new 1 percent wealth tax on those with assets over $32 million and then increases that rate in steps until it reaches 8 percent for those with more than $10 billion.
During the first three presidential debates, a chorus of the more centrist Democratic candidates attacked Warren and Sanders over their Medicare-for-all proposal that would transform the American health-care system.
The debate over the wealth tax played out along familiar lines at the fourth debate, as other rivals of Sanders and Warren sought to distance themselves from the idea.
Businessman Andrew Yang raised questions about the practicality of implementing a wealth tax, noting several European countries have over the past several decades abandoned them.
Klobuchar said that Warren needed a “reality check” and that, “We just have different approaches: Your idea is not the only idea.”
And former congressman Beto O’Rourke (D-Tex.), in perhaps the sharpest attack on the wealth tax, suggested it was “punitive” and said the party should instead “be focused on lifting people up.”