Tax the Hell Out of the Rich, When They’re Alive and When They’re Dead

Alexandria Ocasio-Cortez, Elizabeth Warren and Bernie Sanders each have plans to massively raise taxes on the wealthy. But there’s no need to choose—we should enact them all.

Rebecca Burns

According to AOC, our options are to tax the rich or torch the planet. (Photo by Alex Wong/Getty Images)

An incred­i­ble thing has hap­pened in 2019: We’re actu­al­ly talk­ing seri­ous­ly about tax­ing the rich. And the debate is not over whether to do it, but how.

With­in the month of Jan­u­ary, Rep. Alexan­dria Oca­sio-Cortez and Sens. Eliz­a­beth War­ren and Bernie Sanders pro­posed sep­a­rate mea­sures that would, respec­tive­ly, increase top mar­gin­al tax rates on income, levy a direct tax on wealth and inter­rupt inter­gen­er­a­tional trans­fers of fortunes.

It’s impor­tant to note that these poli­cies are not in any way mutu­al­ly exclu­sive: When it comes to bil­lion­aires, we can tax them when they’re alive, and we can tax them when they’re dead!

But giv­en that these pro­pos­als are already fram­ing the terms of debate for the 2020 pres­i­den­tial con­test, we can still ask which approach goes the fur­thest in abat­ing inequal­i­ty and remov­ing the stran­gle­hold of bil­lion­aires on our politics.

And, it turns out, there are a few dif­fer­ent ways to answer that ques­tion. Warren’s wealth tax would raise the most mon­ey — around $2.75 tril­lion over the next decade, accord­ing to the cal­cu­la­tions of experts back­ing her pro­pos­al. But the amount of mon­ey added to pub­lic cof­fers isn’t the only fac­tor in eval­u­at­ing a pro­gres­sive tax­a­tion plan. Some­what counter-intu­itive­ly, tax­es on the super-rich should bring in less rev­enue over time because they are hav­ing a broad­er effect on reduc­ing inequal­i­ty and there­fore the amount of con­cen­trat­ed wealth or income to be taxed.

That’s where two oth­er sets of polit­i­cal con­sid­er­a­tions come in: How a plan to tax the rich will pro­mote oth­er ben­e­fi­cial effects, like shoring up work­er bar­gain­ing pow­er, and how it will send a polit­i­cal mes­sage and advance a broad­er work­ing-class agenda.

There are of course also plen­ty of impor­tant details that go into how well a pro­gres­sive tax plan actu­al­ly works — how effec­tive­ly it clos­es loop­holes, how it iden­ti­fies and counts assets to be taxed, etc. But those are high­ly tech­ni­cal in nature, and not as eas­i­ly under­stood by the gen­er­al pub­lic. So here, I’m going to con­sid­er the polit­i­cal mes­sages that, to date, seem best con­veyed through each approach.

Warren’s plan: It’s time for the rich to pay their fair share

Warren’s ultra-mil­lion­aire” tax is sweep­ing in its ambi­tion. It’s also the most rad­i­cal, in the sense that we haven’t done it before.

Unlike high­er income and estate tax­es — which were in effect for decades — a wealth tax has pri­mar­i­ly been the stuff of pro­gres­sive econ­o­mists’ fan­tasies. What’s more, one of the most pop­u­lar pro­pos­als to date — put for­ward in a paper by the Insti­tute for Pol­i­cy Stud­ies — has been a 1 per­cent tax on the wealth­i­est 0.1 per­cent, or those with assets of over $20 mil­lion. Warren’s pro­pos­al would tax few­er peo­ple — those with more than $50 mil­lion in assets, an esti­mat­ed 75,000 fam­i­lies — but she would bump up the rate to 2 per­cent. House­holds with more than $1 bil­lion in assets would get a 3 per­cent rate.

Warren’s pro­pos­al is extreme­ly pop­u­lar. A YouGov poll fund­ed by Data For Progress found 61 per­cent over­all sup­port, includ­ing 76 per­cent sup­port among Democ­rats and even a plu­ral­i­ty of sup­port among Repub­li­cans, 44 per­cent to 37 per­cent. It’s also earn­ing acco­lades from cen­ter-left econ­o­mists like Paul Krugman.

That doesn’t mean it’s not shak­ing up the sta­tus quo. At the heart of the pol­i­cy is a legal argu­ment that it’s not uncon­sti­tu­tion­al to tax wealth, and a moral and polit­i­cal argu­ment that, in fact, we need to. 

Where Warren’s pro­pos­al would prob­a­bly be insuf­fi­cient on its own is that it wouldn’t offer a par­tic­u­lar­ly aggres­sive cor­rec­tive to inequal­i­ty over time. It would raise tril­lions for social pro­grams, which is cru­cial­ly impor­tant and would cer­tain­ly have oth­er ben­e­fi­cial polit­i­cal effects. But, as a result of the tax, the fab­u­lous­ly wealthy would be only slight­ly less fab­u­lous­ly so.

And while War­ren has float­ed some poten­tial pro­grams that her wealth tax could pay for — uni­ver­sal child­care, stu­dent loan relief, mil­lions of units of new afford­able hous­ing — cam­paign­ing on a wealth tax divorced from a spe­cif­ic polit­i­cal pro­gram could make it hard­er to mobi­lize peo­ple by lay­ing out clear stakes.

Oca­sio-Cortez: Tax the Rich or Torch the Planet

Alexan­dria Oca­sio-Cortez kicked off this blessed dis­cus­sion last month, when asked dur­ing a 60 Min­utes” inter­view how she would pay for a Green New Deal:

You look at our tax rates back in the 60s and when you have a pro­gres­sive tax rate sys­tem. Your tax rate, you know, let’s say, from zero to $75,000 may be ten per­cent or 15 per­cent, et cetera. But once you get to, like, the tip­py tops — on your 10 mil­lionth dol­lar — some­times you see tax rates as high as 60 or 70 percent.”

By even the most opti­mistic esti­mates, this would bring in only a quar­ter of the rev­enues Warren’s plan would generate.

But at a Wednes­day forum host­ed by Oca­sio-Cortez and the Con­gres­sion­al Pro­gres­sive Cau­cus, Eco­nom­ic Pol­i­cy Insti­tute Pres­i­dent Thea Lee called hik­ing mar­gin­al rates for top earn­ers the obvi­ous and opti­mal start­ing point.”

Among oth­er polit­i­cal ben­e­fits, there’s evi­dence that high­er income tax rates would change the behav­ioral cal­cu­lus of own­ers and CEOs by curb­ing their bar­gain­ing for ever-high­er earn­ings. If the last mil­lion dol­lars some­one makes is going to go most­ly to tax­es any­way, there’s less incen­tive to fight for it by, for exam­ple, keep­ing employee’s pay stag­nant. Along these lines, the Insti­tute for Pol­i­cy Stud­ies has pro­posed link­ing top income tax rates to the min­i­mum wage.

More­over, while wealth inequal­i­ty is even greater than income inequal­i­ty, the lat­ter con­tributes to the for­mer over time.

The Cen­ter for Eco­nom­ic Progress’ Eileen Appel­baum sum­ma­rized this rela­tion­ship at Wednesday’s forum. The top earn­ers can’t spend their incomes on them­selves, so they use them to buy more assets and con­tin­ue to get wealthier.

Unless we do some­thing along the lines of what AOC has sug­gest­ed, this sit­u­a­tion will con­tin­ue,” said Appelbaum.

Beyond these slight­ly more tech­ni­cal con­sid­er­a­tions, AOC’s fram­ing has made the stakes crys­tal clear: If we want to save the plan­et, we can’t afford not to tax the rich.

Sanders: Abol­ish Billionaires

Bernie Sanders’ plan involves restor­ing top mar­gin­al tax rates on inher­i­tances to where they were in the 1970s: 77 per­cent for estates over $1 billion.

The plan would also decrease the thresh­old for the inher­i­tance tax from $11.18 mil­lion to $3.5 mil­lion and impose a 45 per­cent rate on this low­er (but still very rich by any nor­mal stan­dard) tier. Even with this new thresh­old, just 0.2 per­cent of Amer­i­cans would ever pay an estate tax. Thus, in the style of Occu­py, the plan is called For the 99.8 Per­cent Act.”

Again, Sanders’ plan would prob­a­bly raise less rev­enue than Warren’s: About $315 bil­lion over a decade. But by tak­ing aim at the ultra-rich as a class, it also sin­gles out the kind of dynas­tic wealth that allows a few fam­i­lies to wreak hav­oc on our polit­i­cal sys­tem. Just three fam­i­lies with mul­ti-gen­er­a­tional wealth — the Wal­tons, the Kochs, and the Mars — have a com­bined for­tune of $343 bil­lion, more than 3.5 mil­lion times the medi­an wealth of U.S. fam­i­lies. And they use that wealth to fund all man­ner of right-wing policies.

The Right has steadi­ly chipped away at the effec­tive­ness of our exist­ing estate tax for decades, paint­ing it as a death tax” on fam­i­lies who just lost loved ones. Admit­ted­ly, this plan would require bil­lion­aires to die before it rais­es sig­nif­i­cant rev­enue — an esti­mat­ed $2.2 trillion. 

Does that mean it’s vul­ner­a­ble to the death tax” rhetoric? Maybe. But in a delight­ful­ly pet­ty move, the Sanders plan actu­al­ly lists out how much mon­ey the rest of us would get when spe­cif­ic peo­ple like Jeff Bezos, Bill Gates and War­ren Buf­fet depart this Earth — $101 bil­lion, $74 bil­lion and $64 bil­lion, respectively.

Tak­en along­side Sanders’ broad­er efforts to tar­get Bezos and the Wal­tons over work­er pay, this plan sends a clear mes­sage: Bil­lion­aires are bad, and the soon­er they and their unearned influ­ence kick the sol­id-gold buck­et, the bet­ter for the rest of us. And that mes­sage is gain­ing steam.

To achieve left pri­or­i­ties like a Green New Deal, Medicare for All and uni­ver­sal child­care, we prob­a­bly need some ver­sion of all three of these types of tax­es. But it’s impor­tant to eval­u­ate not just how much of the price tag new pro­gres­sive tax­es would cov­er, but how they would trans­form the bal­ance of pow­er, invig­o­rate our pol­i­tics and mobi­lize Amer­i­cans around achiev­ing bold, trans­for­ma­tive policies. 

Rebec­ca Burns is an award-win­ning inves­tiga­tive reporter whose work has appeared in The Baf­fler, the Chica­go Read­er, The Inter­cept and oth­er out­lets. She is a con­tribut­ing edi­tor at In These Times. Fol­low her on Twit­ter @rejburns.
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