Why Elizabeth Warren’s Wealth Tax Proposal Is a Bad Idea
When it comes to spending, no one knows how to run up costs much like the United States government. A billion dollars here and a billion dollars there, and suddenly, we have a $28 trillion deficient. Facing a giant hole in the budget, some elected officials are looking for a scapegoat. Enter America’s wealthy.
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Currently, Massachusetts Senator Elizabeth Warren has proposed an “Ultra Millionaire” Wealth tax. This tax would ask certain Americans to pay more. For families with over $32 million on wealth, a 2% tax would be added. Single tax filers would get hit with that tax with over $16 million in wealth. The wealth tax would scale higher to people with larger net worths. In fact, Jeff Bezos could expect to pay $5 billion in 2020 under the wealth tax rules.
While an Ultra Millionaire Wealth tax seems like an easy solution, there are actually some good reasons why this proposal is a poor idea.
1). Wealth is difficult to measure
Not all wealth is the same. Sure someone with $20 million in the bank is ultra-wealthy. But how about someone with a real estate investment portfolio worth $20 million with only $5 million in equity and an annual income of $1.6 million? Is that person going to get hit with the wealth tax? Would that be fair on such an individual? The Ultra Millionaire Wealth Tax would not make any distinction between these two examples.
2). The wealth tax will not raise much revenue
Overall, the wealth tax would target a tiny part of the population and ultimately raise about $200 billion per year. Consider that the United States Treasury raised over $3.46 trillion in taxes for the 2019 tax year. The wealth tax is simply not worth the trouble.
3). The tax may disincentivize innovation
A number of ultra-wealthy people are innovators who were incentivized to create companies that transform people's lives for the better. These innovators may be less likely to start companies, employ people and change the world if they believe that they will be punished for it.
4). A wealth tax doesn’t address the core issue - inefficient government spending
It doesn’t matter how much the United States government raises; it is pointless if they can’t control their spending. Instead of raising $200 billion, the government would be better served by finding ways to cut $200 billion of the government’s most unnecessary expenditures.
5). It may be unconstitutional
Finally, the Ultra Millionaire Wealth Tax may be lawful. After the Supreme Court ruled in 1895 that federal income tax was unconstitutional, the United States government ratified the 16th Amendment in 1913 to collect income tax. However, income tax is not necessarily the same as a wealth tax. Therefore, a wealth tax may not even be legal to collect.
Keeping taxes under control
Like most families and businesses, the government needs to learn how to control its spending. Looking to collect more taxes, especially from a tiny portion of the population, will not solve the underlying deficient issues of the government.
REFERENCE:
https://taxfoundation.org/wealth-tax/
https://www.axios.com/wealth-tax-warren-constitution-8c098c0b-7dc4-48ab-a154-d578aec20d0d.html
