Senator Warren would impose a 2 percent annual tax on wealth above $50 million, and a 6 percent annual tax on wealth above $1 billion.
These numbers may seem small, but remember that they would be applied every year. With wealth taxes, small numbers have large effects. Applied to an asset yielding a steady return of 1.8 percent (roughly what you’d get from a 10-year Treasury note), a 6 percent wealth tax is the equivalent of a 333 percent income tax.
If Senator Warren’s wealth tax had been in effect since 1982, Warren Buffett’s 2018 net worth would have been $14.5 billion, rather than the $88.3 billion it actually was. Jeff Bezos would have had about one-third of his current wealth. Bill Gates’s wealth would have been 81 percent less.
Sound public policy requires balancing competing goods. Senator Warren’s proposed wealth tax would fail to achieve appropriate balance in several important ways. It would not balance the moral obligation of the rich to pay more with the need to avoid reducing the rich to piggybanks for the rest of society. Its purpose of “safeguarding democracy” against the threat of plutocracy is both wildly overblown and inappropriate. Its extreme effects are not even remotely connected to the scale of the problem she seeks to address.
And as I discuss in my latest Bloomberg column, it throws a fundamental balance in the U.S. system of government out of whack — that between the rights of the majority to govern and the rights of minority groups to protection from majoritarian excess.
As the public debate has made perfectly clear, the wealth tax would be levied to knock the rich down a peg. Because the aesthetics of a society in which a few have fabulous wealth are unappealing to some. Because many believe no one needs that much money, and want to use the tax code to take it.
This would be an abuse of the tax system. It would be an abuse of government power. The tax code shouldn’t be weaponized for the purpose of penalizing any minority. Not even the rich.
Check out my column for my full argument. Your comments, as always, are very welcome.