A group of progressive Democrats is restarting an effort to increase taxes on the wealthiest Americans.
Sen. Elizabeth Warren, D-Mass., on Tuesday reintroduced the Ultra-Millionaire Tax Act, which would slap a 2% tax on households worth $50 million to $1 billion and a 3% tax on households worth more than $1 billion. Reps. Pramila Jayapal, D-Wash., and Brendan Boyle, D-Pa., have introduced a companion bill in the House.
"As President Biden says, no one thinks it’s fair that Jeff Bezos gets enough tax loopholes that he pays at a lower rate than a public school teacher," Warren said in a news release. "All my bill is asking is that when you make it big, bigger than $50 million dollars, then on that next dollar, you pitch in two cents, so everyone else can have a chance."
According to Warren, the tax bill would affect the wealthiest 100,000 households in the U.S., about 0.05% of the population, USA Today first reported.
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The new version of the bill contains additional rules to crack down on tax avoidance for wealth held in trusts. It would also give the IRS an additional $100 billion to fund auditing and enforcement efforts.
Additionally, Warren's proposal includes a 40% "exit tax" on people worth more than $50 million who attempt to renounce their U.S. citizenship to avoid paying the tax.
The Wharton Budget Model at the University of Pennsylvania estimated a previous version of Warren's legislation would raise $2.7 trillion in revenue over the next decade. That analysis also found the wealth tax would reduce capital by 3.1%, slash average hourly wages by 1.2% and reduce gross domestic product (GDP) by 1.2% in 2050.
"Smaller federal deficits translate into less crowding out and thus increased national saving and greater capital accumulation. However, wealthy households that face a tax on their savings choose to save less and thus accumulate less capital," Penn Wharton economists explained in 2021.
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"The net effect is a decline in the total capital stock of 1.4 percent in 2031 and 3.1 percent in 2050. This decline in capital in turn makes workers less productive, which is reflected by a decline in wages of 0.7 percent in 2031 and 1.2 percent in 2050. Lower private capital leads GDP to decline by 0.6 percent in 2031 and 1.2 percent in 2050."
Warren's legislation is supported by five other Democratic senators, 27 House Democrats and Sen. Bernie Sanders, I-Vt. The proposal comes after President Biden, a Democrat, called for higher taxes on businesses and the wealthy during his State of the Union Address earlier this month.
"The way to make the tax code fair is to make big corporations and the very wealthy finally pay their share," Biden said. He asked Congress to raise the minimum corporate tax to 21% and said billionaires should pay a minimum tax of 25%. Although the president's plan would impose that tax on millionaires worth more than $100 million as well.
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Voters in Warren's home state of Massachusetts narrowly approved a 4% surtax on incomes over $1 million in a statewide ballot referendum in November 2022. The state Department of Revenue estimates the tax will generate over $1.5 billion in revenue for the fiscal year ending June 2024, according to local news station WBUR.
Critics of wealth tax proposals said Warren and Biden's plans would kill jobs.
"It is clear that lawmakers at the highest levels of government fundamentally misunderstand what net worth actually means. Senator Warren’s proposal sets out to tax wealth as if net worth reflected cash in the bank. It paints a fictional ‘Scrooge McDuck’ image of these billionaires storing their own money in large swimming pools, just laying around," said Dan Savickas, director of policy at the Taxpayers Protection Alliance.
Savickas explained that Warren's wealth tax is a tax on investments that businesses use to create jobs and help the economy. It is not a tax on liquid assets that can be paid to the government.
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"A tax on wealth is a tax on gains that have not been realized. Innovators and investors cannot pay off something they don’t have. In order to comply with Senator Warren’s ridiculous scheme to boost her political profile, these businessmen and businesswomen will have to sell off these assets or shrink their operations," Savickas explained.
"This will cost jobs, plainly and simply. This is as misguided an economic policy proposal as there is right now, and it is the working people Senator Warren purports to champion that will bear the brunt of the consequences."
