The wealth taxes Democratic presidential candidates Elizabeth Warren and Bernie Sanders have proposed continue to provoke the malice of Wall Street, corporate democrats, and now even other Democratic candidates running for president.
As I have written in PoliticusUsa.com (here and here), the intensity of the energy devoted to this criticism, combined with the lack of substance typically informing these critiques, is puzzling because the policies would impact, in the case of Warren’s proposal, only .1 percent of American households. The intensity seems disproportionate to the impact.
Is this outrage on behalf of the 99.9 percent of Americans?
Is the 99.9 percent of Americans voicing these criticisms?
Let’s look at who’s talking:
When Warren surged in the polls in September, CNBC published an article with the headline: “Wall Street Democratic donors warn the party: We’ll sit out, or back Trump, if you nominate Elizabeth Warren.” The article offered this quotation as representative of the widespread opinion among “high-dollar democratic donors and fundraisers in the business community”: “You’re in a box because you’re a Democrat and you’re thinking, ‘I want to help the party, but she’s going to hurt me, so I’m going to help President Trump.’”
To whom is this quotation attributed? The reporting tell us: “a senior private equity executive, who spoke on condition of anonymity in fear of retribution by party leaders.”
Clearly, this is a proud voice representative of average Americans worried about healthcare and how they’ll take care of their children and pay for college. In case you missed my irony, the opposite seems to be true.
A more recent critic appearing in the headlines on CNBC.com is Barry Sternlicht, CEO of Starwood Capital, a company possessing $60 billion in assets. On CNBC’s “Squawkbox,” he said, “I think it’s a crazy idea.” He questioned the ability of the IRS to arrive at an accurate valuation of his business: “It’s impossible to do—multiples, changes in interest rates. It’s almost an impossible thing to do.”
Really? The IRS, or even the company that files its own taxes and reports on its value, cannot figure out what the company is worth?
If it’s a matter of fluctuating values, Gabriel Zucman, an economist at UC Berkeley who helped craft Warren’s proposal, countered: ““The IRS would come up with the best valuation possible. If the taxpayers disagree, they can pay, in kind, with shares.”
Sternlicht’s main complaint, though, is this: ““You’re going to empower a lot of accountants. They’re going to be the biggest, fastest-growing industry in the world.”
So the reasons Warren’s wealth tax is “crazy” is because it’s difficult to calculate the value of a company (even though the companies themselves do it every day in market environments) and because it would create more work for accountants. Should we also not seek to pass necessary environmental policies because they might entail more work for scientists?
There is little push-back in the media when these criticisms are voiced, even when those voices pretend to speak for the majority of Americans.
For example, Lawrence Summers, Treasury secretary under President Bill Clinton, and law professor Natasha Sarin argued in a paper they wrote that a wealth tax would “undermine business confidence, reduce investment, degrade economic efficiency and punish success in ways unlikely to be good for the country or even to be appealing to most Americans.”
Again, is this critique compelling and does it really capture, while it pretends to speak for the majority, what is really “appealing to most Americans”?
The idea that a tax that would impact .1 percent of American households, costing these households two cents on every dollar of wealth over $50 million, would “undermine business confience,” sounds, on the surface, rather ludicrous, as is the idea that it will reduce investment and make the economy function less efficiently.
Let’s just think historically for a minute, and we can see that America prospered when tax rates were much higher for the wealthy. In thinking about these critiques, let’s keep in mind that the top marginal tax rate for individuals in the U.S. through the 1950s and 1960s exceeded 90%; from 1971 through 1980, the top rate was 70%; and Ronald Reagan cut the top rate to 50% in 1982. In recent years, the top rate has fluctuated between the mid- to high-30s.
Was this punishing to the wealthy? They seem to have done just fine.
And what has not been talked about are the economic efficiencies and investments Warren’s plan would spur, not to mention what most Americans would find appealing. She proposes with the revenues to provide universal childcare, to make college at public institutions tuition-free, and to address the student debt burden that creates a major drag on the economy.
Just take the last point:
College debt levels have topped $1.4 trillion and, according to many economists, constitute a major drag on our economy. Think about it: college graduates saddled with debt are reluctant, and frankly unable, to purchase a home, start a family, or create a small business, constraining key sectors that drive economic growth and vitality under capitalism such as the housing market and entrepreneurial development.
According to a study from the Levy Institute, canceling the $1.4 trillion in student debt would spur economic activity to the tune of creating between 1.2 and 1.5 million new jobs in the first few years, creating tax-paying citizens who buy houses, start families, create businesses, and so forth.
And we know that providing childcare helps people work and contribute to the economy.
So what about these efficiencies?
Beto O’Rourke, in the last debate, jumped on the bandwagon, accusing Warren’s policies of being “more focused on being punitive or pitting one part of the country against the other instead of lifting people up.”
It would be good to hear from most Americans, those already feeling punished in this economy. They’ve been pushed down for years by policies favoring the .1%.
Would not a wealth tax, such as Warren proposes, help lift them up?
It would be good to hear from the 99.9%. Maybe this constituency can get an interview on CNBC.