- Democrats have proposed a 2% tax on household net worth over $US50 ($65) million.
- The bill has anti-evasion measures for the tax, which would go to 3% for net worth over $US1 ($1) billion.
- Progressive lawmakers have praised the tax, but moderates and conservatives have pushed back on it.
- Visit the Business section of Insider for more stories.
In an effort to combat wealth inequality, Democrats on Monday unveiled a bill that would impose new taxes on American households with net worths over $US50 ($65) million.
Sen. Elizabeth Warren of Massachusetts, who has long been a proponent of a wealth tax, introduced the Ultra-Millionaire Tax Act with Rep. Pramila Jayapal of Washington and Rep. Brendan Boyle of Pennsylvania.
A press release said the proposed tax would apply to 0.05% of households. It would place a 2% tax on household net worth between $US50 ($65) million and $US1 ($1) billion and a 3% tax on household net worth over $US1 ($1) billion.
“The ultra-rich and powerful have rigged the rules in their favor so much that the top 0.1% pay a lower effective tax rate than the bottom 99%, and billionaire wealth is 40% higher than before the COVID crisis began,” Warren said in a statement. “A wealth tax is popular among voters on both sides for good reason: because they understand the system is rigged to benefit the wealthy and large corporations.”
—Elizabeth Warren (@SenWarren) March 1, 2021
The ultramillionaire tax also has anti-evasion measures, according to a bill summary, which include:
- A $US100 ($129) billion investment to strengthen the IRS.
- A 30% minimum audit rate for taxpayers subject to the tax.
- A 40% exit tax on US citizens with net worths over $US50 ($65) million who renounce their citizenships.
- Third-party reporting for existing tax information exchange agreements, along with penalties for underpayment.
The press release cited an analysis that the economists Emmanuel Saez and Gabriel Zucman of the University of California at Berkeley sent to Warren on Friday regarding the wealth tax. It said the tax would bring in at least $US3 ($4) trillion in revenue over 10 years.
According to Saez and Zucman’s estimates, 100,000 American families would be liable for the wealth tax in 2023, and the tax would raise about 1% of gross domestic product a year.
Warren has consistently advocated a wealth tax and made it a core component of her 2020 presidential campaign. Her campaign fact sheet said the money gained from a wealth tax would allow for investments in universal childcare, tuition-free technical school, student-debt cancellation, and financing for “Medicare for All.”
And other progressive lawmakers, including Sen. Bernie Sanders of Vermont – a cosponsor of the bill – have advocated a tax on the wealthiest Americans.
“When the gap between the very rich & everyone else is widening; when the 50 richest Americans own more wealth than the bottom half of our country; when the effective tax rate of billionaires is less than that of average workers; YES. We must address income & wealth inequality,” Sanders said in a tweet on February 18.
In a 2019 Insider poll of 1,233 Americans, 54% of respondents said they supported Warren’s wealth tax. But a tax on the rich has received pushback from moderate and conservative lawmakers, and it will most likely be difficult to pass through Congress. For example, during the Democratic presidential debate on October 15, 2019, Sen. Amy Klobuchar of Minnesota said Warren’s plan “is not the only idea.”
As an alternative to the wealth tax, Rep. Ro Khanna of California introduced a bill on February 17 to hold the ultrarich accountable by requiring more aggressive auditing from the IRS, rather than imposing additional taxes.
“Right now, the wealthiest 1% are responsible for roughly 70% of the ‘tax gap’ – the difference between taxes owed and taxes paid,” Khanna said in a statement. “It’s time every American pay their fair share.”