What if the US had a wealth tax? | WHAT IF?
What if the US had a wealth tax? | WHAT IF?

Senator Bernie Sanders: “We’re gonna tell the wealthiest people in this country that they are gonna start paying their fair share of taxes.” Alan D. Viard: Wealth taxes are in the news these days. Senator Elizabeth Warren: “We need to put a tax on the top one-tenth of one percent. The biggest fortunes in this country.” Alan D. Viard: Supporters see a wealth tax as a
way to reduce inequality and reduce the political power of the very wealthy.
Opponents claim that a wealth tax would face serious challenges. But what exactly
is a wealth tax, and would it work for America? First, let’s talk about what a
wealth tax is and what it isn’t. It’s important to recognize that a wealth tax
is not the same thing as an income tax. Instead of being taxed on things like
wages and interest, a wealth tax would apply to assets that are owned, minus debts
that are owed. As you’ve probably guessed, the wealth tax would only apply to the
very wealthy. In the November 2019 version of her plan, Elizabeth Warren
proposed a tax of two percent per year on wealth over $50 million and six percent per
year on wealth in excess of $1 billion. Bernie Sanders’ plan begins with a rate of
one percent per year for wealth above $32 million and reaches 8 percent
per year for wealth above $10 billion. Now these numbers might seem low,
but remember that the same stock of wealth is taxed each year, and that adds
up over time. Let’s put this in terms of income tax rates. Imagine a taxpayer who holds a bond with a
fixed interest rate of three percent per year. A six percent per year wealth tax is
equivalent to a 200% income tax because the tax is
double the taxpayer’s interest income. And don’t forget that a wealth tax would be
in addition to the income tax. Now that we have a basic understanding of what
a wealth tax is, let’s try to predict what would happen if America decided to
adopt it. First, lobbyists would likely fight for special tax breaks, exempting
certain kinds of assets from the tax. Asset exemptions would not only reduce the
tax’s revenue yield, but they would encourage wealthy taxpayers to shift
their wealth to the exempt assets. We’ve seen that pattern occur in France and
Germany, who have since repealed their wealth taxes. Next, taxpayers and the IRS
would have the burden of figuring out what certain assets are worth. Now that’s
easy for bank accounts or stocks, but it’s far more complicated for many other
things. How much would you say this house is worth? This business? This yacht?
Another possible side effect of a wealth tax is the impact on businesses and
workers. Reducing the savings of the richest Americans reduces the funds
available for business investments in factories, equipment, and research. With
less investment, workers would be less productive and would earn lower wages, so
workers could actually end up bearing a small part of the wealth tax burden. To
top things off, the wealth tax might be struck down is unconstitutional. The
Constitution requires that direct federal taxes, other than income taxes, be
divided among the states in proportion to their population. Dividing the wealth
tax in that way would probably not be doable. Some legal scholars argue that
the wealth tax is not subject to this requirement because it’s an indirect tax,
but others disagree. Nobody knows how the courts would rule. With a poor track
record in Europe, the potential for special tax breaks, administrative
challenges, and the risk of being struck down as unconstitutional, a wealth tax
may not be the best strategy for taxing the rich. It might make more sense to use other
policies, such as reforms to the income tax and the estate and gift taxes. But until then,
we’ll just have to ask ourselves “What if?” To learn more about
wealth taxes, check out the link in the description below. Also, let us know what
other topics you’d like AEI scholars to cover on “What If?” and be sure to
subscribe for more videos and research from AEI.

19 thoughts on “What if the US had a wealth tax? | WHAT IF?”

  1. lorch anders says:

    How about you socialists become smart enough to be part of that 1% oh wait you're too dumb.

  2. Marcus Tulius Cicero says:

    Most civilized countries have varying versions of a wealth tax

  3. Leafa says:

    know what would be better? not making white americans pay for 75% of the federal income tax yet only using welfare at a 13.7% rate. Meanwhile hispanics and blacks have a 70% welfare usage per household and only pay 8% and 8.8% of revenue through income tax. That's the true monstrous inequality right there..

  4. spivackl says:

    You don't even discuss how many Americans would leave. Dont you think Bill Gates could find a country willing to give him citizenship, without taxing his wealth? I bet he could.

  5. Indian-Minority-Immigrant says:

    All developed civilized countries have higher wealth tax and other marginal taxes..

    American clown's think they are above the world. They misattribute low tax growth after the Regan era as a"Out of the world Americanism" but they pay low taxes because of exploiting Oil and other resources from poor countries for cheaper prices.
    That means poor countries in the world pay taxes on behalf of American MNCs

  6. Touch of Gray says:

    ALL taxes are THEFT

  7. Walter Cook says:

    "How to say trickle down economics without saying trickle down economics."

  8. Giacomo Trottier says:

    This is very disingenuous. You pose this 'what if' question as if you are taking an unbiased view at the outcomes. instead you show trickle down economics( sad guy in cafe, yachts disappearing, so sad) and other countries that have repealed their wealth tax. You don't at all talk about the potential benefits( universal health care, paid parental leav… etc) , and you don't mention that norway(happiest country in the world) and switzerland also have a wealth tax.

  9. Dave Koffee says:

    How about instead of a wealth tax, we just stop waging war in the Middle East and elsewhere? Just read the the war in Afghanistan cost us a trillion dollars.

  10. Hardcore Bunny says:

    I say the government should cut down on spending, that way we all pay less in taxes. After all we were only supposed to pay income tax till WW1 was paid off.

  11. etocadet says:

    A wealth tax discourages long term investment. It encourages people to spend in the now on consumables and luxuries. I thought socialists were against that?

    My parents don’t live a life of luxury. They are rich because they invested their cash as opposed to spending it. So their reward for self sacrifice is forced altruism?

    Go fuck yourselves.

  12. blurglide says:

    It'll just be temporary and only affect the very wealthy….just like the income tax, right?

  13. James Dunkerson says:

    Benefits for the rich may not trickle down, but I assure you costs for the rich will certainly trickle down.

  14. Simon Grey says:

    Wealth tax is like putting bandaid on a infected wound. It may look like solution in short run, but will have enormous negative consequences over longer period of time.
    Wealthy will either find ways to avoid paying it or move their fortunes overseas. Or, even worse, move their companies overseas, then US budget will see nothing at all.
    What needs to be done is to lose various tax breaks and incentives to the rich and make everybody pay same percentage, without exceptions.

  15. dan parish says:

    I don’t care how rich people get, I do care though when they use their wealth and power so they can influence laws and media for personal gain. I don’t like how Jeff Bezos owns the Washington Post.

  16. Kiet Tran says:

    How do you tax Jeff Bezos or other when their salary is only $1 a year? How do you tax the wealthy people when they hide their money off shore?

  17. Sergey K says:

    Every point here is misleading or BS. Please disclose which billionaire sponsored this?
    1:35 a dumb comparison.
    2:10 yachts, houses, cars, art should not be exempt…
    2:22 France did not fix their loopholes, US has different legislation.
    2:28 we already do that with land tax and it works. Approximate is better then nothing. Saying we can't be 100% fair is no excuse for doing nothing at all.
    2:48 BS, proven wrong long ago.
    Distributing wealth amongst poor has huge economic stimulus.
    Furthermore if you are taxed on wealth it is an incentive to make sure your money is invested and working hard to offset the tax, as apposed to just sitting on it, building a mention and leaving it unused.
    3:10 constitutions are written by people for people and are changed when needed.

  18. Thomas White says:

    You want to talk about wealth tax??? First, let's talk about a corruption and lobbyists tax. Both parties are playing this game and keeping the country divided. That is the easiest way to control the masses. Example: During the civil war era, black people were slaves, but poor white people were forced to fight and die. If they deserted, they were hung. To further stress this, rich slave owners weren't required to send their sons to war.

  19. powerlinkers says:

    hope sanders die first, this would collapse USA economy.

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