What Americans Think Of A Wealth Tax

Oct 23, 2019

Should the richest Americans pay more taxes, not just on what they earn, but on everything they own? We examine the case for and against a wealth tax.

Guests

Emmanuel Saez, co-author of the new book “The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay.” Professor of economics and director of the Center for Equitable Growth at the University of California, Berkeley. (@berkeleyecon) Advised on Sen. Elizabeth Warren’s 2020 wealth tax plan.

Lawrence Summers, former U.S. treasury secretary in the Clinton administration from 1999-2001. Former director of the National Economic Council for President Obama. Former president of Harvard University. Professor and director of the Mossavar-Rahmani Center for Business and Government at Harvard’s Kennedy School of Government. (@LHSummers)

From The Reading List

Washington Post: “Opinion: Be very skeptical about how much revenue Elizabeth Warren’s wealth tax could generate” — “Sen. Elizabeth Warren (D-Mass.) has made her proposed 2 percent wealth tax on those worth more than $50 million a central part of her presidential campaign. Emmanuel Saez and Gabriel Zucman, two economists at the University of California at Berkeley, who helped developed the proposal, estimated that it it would rake in $187 billion a year.

“In April, we published a piece in The Post suggesting that this estimate was likely overly optimistic. This week, Saez and Zucman published a rejoinder.

“Their response is disingenuous. They focus most of their fire on what they label as our revenue estimate: that the proposed wealth tax would raise $25 billion annually, rather than the $187 billion they estimate. In reality, we are explicit that $25 billion is a rough back-of-the-envelope number and state that “We would be surprised if the $25-billion-a-year figure we suggest was not a significant underestimate of the revenue potential of a 2 percent wealth tax.” The purpose of our piece was not to provide an alternative revenue estimate for the wealth tax but to call into question the naively high estimate provided by Saez and Zucman.

“Readers may find it difficult to evaluate the technical aspects of this debate. But they should keep in mind that Saez and Zucman are writing in a commissioned letter to a presidential candidate for a campaign proposal. Meanwhile, experts with experience in tax policy scorekeeping and academics on the progressive end of the political spectrum — such as ourselves and MIT economist Jonathan Gruber — are much more pessimistic on the revenue-raising potential of wealth taxation. In this context, Saez and Zucman’s indignant insistence that their $187 billion number is not a ‘best case scenario’ but instead a ‘middle-ground’ estimate seems unsound.”

New Yorker: “The French Economist Who Helped Invent Elizabeth Warren’s Wealth Tax” — “To trace the progress of the wealth tax from a fringe academic idea to the center of the Democratic Presidential primary, it is helpful to begin a bit off-center. On September 15, 2008, the day that Lehman Brothers filed for bankruptcy, a twenty-one-year-old student of Thomas Piketty, Gabriel Zucman, started work as a trainee economic analyst in the offices of a Paris brokerage house called Exane. Zucman felt obviously underequipped for the task before him: to write memos to the brokerage house’s clients and traders helping to explain why the very durable and minutely engineered global financial system appeared to be on the verge of collapse. Poring over some of the data he was given, which concerned the international flows of investments, Zucman noticed some strange patterns. The amount of money that had been moving through a handful of very small economies (Luxembourg, the Cayman Islands, the tiny Channel Islands of Jersey and Guernsey) was staggering. ‘Hundreds of billions of dollars,’ Zucman recalled recently, making the ‘B’ in ‘billions’ especially emphatic. Eventually, he would calculate that half of all foreign direct investment—half of the risk-seeking bets, placed from overseas in India, China, Brazil, and Silicon Valley, and of the safety-seeking investments, placed in the United States and Europe and stock indexes—was moving through offshore hubs like these.

“Before the financial crisis, the rise of offshore tax havens hadn’t been ignored—one element of the Enron scandal of 2001, for instance, was the eight hundred and eighty-one overseas subsidiaries the company had created, which had helped it avoid paying federal taxes for three years—but those stories took place within a more confined and more frankly moral framework: it was a cat-and-mouse plot, about the mobility of wealth, and the fruitless efforts to pursue it. Zucman’s intuition was that these arrangements did not describe a moral or a legal drama but a macroeconomic one. That much wealth, poorly documented or regulated, might have helped to destabilize the global economy. It also seemed that, if economists were not attuned to the amount of wealth stored in offshore havens, they might also have missed the extent of global inequality, since it was billionaires who stored money in the Cayman Islands, not retirees. ‘You know, the way we study inequality is we use survey data, state-tax data,’ Zucman told me, ‘and that’s not going to capture these Swiss bank accounts.’ After half a year at Exane, Zucman was back in graduate school, working with Piketty on the study of wealth inequality in the United States and Europe that became Piketty’s landmark book, from 2013, ‘Capital in the Twenty-First Century,’ as well as on his own fixation—on how big the island-shaped loopholes in the global economy would turn out to be.”

New York Times: “Democrats’ Plans to Tax Wealth Would Reshape U.S. Economy” — “Progressive Democrats are advocating the most drastic shift in tax policy in over a century as they look to redistribute wealth and chip away at the economic power of the superrich with new taxes that could fundamentally reshape the United States economy.

“As they compete for the Democratic presidential nomination, Senators Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont have proposed wealth taxes that would shrink the fortunes of the richest Americans. Their plans envision an enormous transfer of money from the wealthy to ordinary people, with revenue from the wealth tax used to finance new social programs like tuition-free college, universal child care and ‘Medicare for all.’

“The wealth taxes under discussion would deal a major blow to the balance sheets of American plutocrats like Jeff Bezos, Bill Gates and Warren Buffett. If the tax that Ms. Warren has called for had been in place since 1982, the net worth of the 15 richest Americans in 2018 would have been half as much, according to two economists who helped develop her plan. The Sanders wealth tax, which was released last week, would have eroded their fortunes even further, to barely one-fifth of their 2018 total.

“The idea of a wealth tax has become an animating issue for the Democratic Party, which sees it as a solution to long-festering concerns about inequality and the rapid concentration of economic power among wealthy Americans. Its emergence is also an antidote to the policies of President Trump, whose $1.5 trillion tax cut largely benefited rich Americans and corporations while leaving future generations with the bill.”

This article was originally published on WBUR.org.

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