Taxing the superrich is an idea whose time has come — again.
America invented progressive taxation. And there was a time
when leading American politicians were proud to proclaim their willingness to
tax the wealthy, not just to raise revenue, but to limit excessive
concentration of economic power.
“It is important,” said Theodore Roosevelt in 1906, “to grapple with
the problems connected with the amassing of enormous fortunes” — some of them,
he declared, “swollen beyond all healthy limits.”
Today we are once again living in an era of extraordinary
wealth concentrated in the hands of a few people, with the net worth of the
wealthiest 0.1 percent of Americans almost equal to that of the bottom 90
percent combined. And this concentration of wealth is growing; as Thomas
Piketty famously argued in his book “Capital in the 21st Century,” we seem to
be heading toward a society dominated by vast, often inherited fortunes.
So can today’s politicians rise to the challenge? Well,
Elizabeth Warren has released an impressive proposal for taxing extreme
wealth. And whether or not she herself becomes the Democratic nominee for
president, it says good things about her party that something this smart and
daring is even part of the discussion.
The Warren proposal would impose a 2 percent annual tax on
an individual household’s net worth in excess of $50 million, and an additional
1 percent on wealth in excess of $1 billion. The proposal was released along
with an analysis by Emmanuel Saez and Gabriel Zucmanof Berkeley, two
of the world’s leading experts on inequality.
Saez and Zucman found that this tax would affect only a
small number of very wealthy people — around 75,000 households. But because
these households are so wealthy, it would raise a lot of revenue, around $2.75
trillion over the next decade.
Make no mistake: This is a pretty radical plan.
I asked Saez how much it would raise the share of income (as
opposed to wealth) that the economic elite pays in taxes. His estimate was that
it would raise the average tax rate on the top 0.1 percent to 48 percent from
36 percent, and bring the average tax on the top 0.01 percent up to 57 percent.
Those are high numbers, although they’re roughly comparable to average tax
rates in the 1950s.
Would such a plan be feasible? Wouldn’t the rich just find
ways around it? Saez and Zucman argue, based on evidence from Denmark and
Sweden, both of which used to have significant wealth taxes, that it wouldn’t
lead to large-scale evasion if the tax applied to all assets and was adequately
enforced.
Wouldn’t it hurt incentives? Probably not much. Think about
it: How much would entrepreneurs be deterred by the prospect that, if their big
ideas pan out, they’d have to pay additional taxes on their second $50
million?
It’s true that the Warren plan would limit the ability of
the already incredibly wealthy to make their fortunes even bigger, and pass
them on to their heirs. But slowing or reversing our drift toward a society
ruled by oligarchic dynasties is a feature, not a bug.
And I’ve been struck by the reactions of tax experts
like Lily Batchelderand David Kamin; while they don’t necessarily endorse
the Warren plan, they clearly see it as serious and worthy of consideration. It
is, writes Kamin, “addressed at a real problem” and “goes big as it should.”
Warren, says The Times, has been “nerding out”; well, the nerds are impressed.
But do ideas this bold stand a chance in 21st-century
American politics? The usual suspects are, of course, already comparing Warren
to Nicolás Maduro or even Joseph Stalin, despite her actually being more like
Teddy Roosevelt or, for that matter, Dwight Eisenhower. More important, my
sense is that a lot of conventional political wisdom still assumes that proposals
to sharply raise taxes on the wealthy are too left-wing for American voters.
But public opinion surveys show overwhelming support for raising taxes on the rich. One recent
poll even found that 45 percent of self-identified Republicans support
Alexandria Ocasio-Cortez’s suggestion of a top rate of 70 percent.
By the way, polls also show overwhelming public support for
increasing, not cutting, spending on Medicare and Social Security. Strange to say,
however, we rarely hear politicians who demand “entitlement reform” dismissed
as too right-wing to be taken seriously.
And it’s not just polls suggesting that a bold assault on
economic inequality might be politically viable. Political scientists studying
the behavior of billionaires find that while many
of them push for lower taxes, they do so more or less in secret, presumably
because they realize just how unpopular their position really is. This “stealth
politics” is, by the way, one reason billionaires can seem much more liberal
than they actually are — only the handful of liberals among them speak out in
public.
The bottom line is that there may be far more
scope for a bold progressive agenda than is dreamed of in most political
punditry. And Elizabeth Warren has just taken an important step on that agenda,
pushing her party to go big. Let’s hope her rivals — some of whom are also
quite impressive — follow her lead.
- Paul Krugman
My take: You can expect with proposals like this the religious right-wing will come out in arms over this but what is it really with so much of this anti-government
anti-tax sentiment from Christians? Why this proclivity for the rich from some Christian churches when the
Bible is so full of scriptures opposing the pull and seduction of money and
seriously questioning the condition of the rich?
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