- At the October 15 Democratic presidential debate, candidates were asked how they would address wealth inequality. A wealth tax was a major part of their answers, a New York Times transcript of the event shows.
- A wealth tax, like the ones proposed by presidential candidates Sen. Elizabeth Warren and Sen. Bernie Sanders, would make ultra-wealthy Americans pay the federal government a small percentage of their net worth each year.
- Sanders’ “Tax on Extreme Wealth” is more aggressive than Warren’s “Ultra-Millionaire Tax.”
- Despite popular support, a wealth tax bill would have to overcome opposition in both Houses of Congress, the White House, and the Supreme Court before becoming law, Business Insider previously reported.
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A majority of the American public, a handful of presidential candidates, and a group of ultra-wealthy Americans agree that the United States needs a wealth tax to help close the growing wealth gap. In June, a group of 18 ultra-wealthy Americans referred to Warren’s plan in an open letter begging to be taxed more.
But few people agree on how just how much that tax should be.
Progressive presidential candidates Sen. Elizabeth Warren and Sen. Bernie Sanders have both released their own wealth tax proposals, and questioned the other candidates’ commitment to ending wealth inequality because they have yet to do so.
“My question is not why do Bernie and I support a wealth tax, it’s why is it – does everyone else on this stage think it is more important to protect billionaires than it is to invest in an entire generation of Americans?” Warren said, according to a New York Times transcript of her exchange with CNN host and debate moderator Erin Burnett.
Before Sanders’ unveiled his plan in September, Warren’s plan was the most commonly cited example of a moderate wealth tax. Now, though, Sanders’ “Tax on Extreme Wealth” makes Warren’s “Ultra-Millionaire Tax” “look moderate,” NPR’s Greg Rosalsky wrote.
Here’s a breakdown of how Sanders’ and Warren’s wealth taxes compare. The endpoints of Sanders’ tax brackets overlap, so for the purposes of this chart, Business Insider rounded to the nearest decimal based on standard tax policy.
Key differences between Bernie Sanders’ and Elizabeth Warren’s wealth tax proposals
As shown in the chart above, Sanders’ plan proposes taxing Americans who have lower net worths than Warren’s plan does. A married couple with a collective net worth above $US32 million will have to pay a wealth tax under Sanders’ plan, while couples worth less than $US50 million would be exempt from Warren’s tax.
The richest Americans – those with a net worth above $US10 billion – would also pay 8% in taxes more Sanders’ plan, substantially more than the 3% proposed by Warren.
The difference between the two plans is perhaps best illustrated by how much their respective authors say they would raise. Warren’s campaign estimates that her wealth tax would raise $US2.75 trillion in 10 years, while Sanders’ campaign estimates that his tax would raise $US4.35 trillion during the same time period.
Wealth accumulation in the US would look a lot different under a wealth tax
A study by The University of California at Berkeley’s Emmanuel Saez and Gabriel Zucman and published in the Brookings Papers on Economic Activity found that if a moderate wealth tax had been introduced in 1982, Jeff Bezos‘ fortune would be half what it was in 2018. Bill Gates, meanwhile, would be $US61 billion less rich.
While no such study has been done on Sanders’ proposal, NPR’s Greg Rosalsky reported that it “wouldn’t just slow the growth of wealth at the top. It would essentially stop it.”
Any wealth tax proposal will face substantial headwinds before becoming law, Business Insider previously reported. The constitutionality of such a tax would likely end up debated in front of the Supreme Court, according to former Department of Justice tax attorney James Mann, who is now a tax partner at law firm Greenspoon Marder. Additionally, the revenue raised by the proposed wealth tax would likely be much lower than its advocates expect because of tax evasion, Mann told Business Insider.
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