A Nobel Prize-winning economist said the proposed "wealth tax" by Sen. Elizabeth Warren (D., Mass.) is probably a non-starter and could hurt her chances.
"Their proposals have no chance," Nobel laureate Robert Shiller told Bloomberg at the World Economic Forum in Davos, Switzerland.
Warren, one of multiple contenders for the 2020 Democratic presidential nomination, told supporters in a fundraising email on Thursday that she was proposing a "Ultra-Millionaire Tax" on those with a net worth of over $50 million. Her advisers say the tax would raise nearly $3 trillion over 10 years, and Warren said the revenue could help with "rebuilding our middle class."
Shiller, who teaches economics at Yale University, said he would advise putting in a plan in the future for such a tax to kick in if wealth inequality became "catastrophic."
Asked if Democrats could run with such a policy and gain the support of middle America, Shiller said no.
"Right now, I think that Elizabeth Warren has just harmed her potential by bringing a proposal that's not going to be popular," he said.
Shiller's Yale University is located in New Haven, Connecticut, a state that Shiller's interviewer pointed out has been harmed by high taxation. The population has declined in the progressive state over the past decade, and it's facing what in 2017 CNBC called a "business migration crisis" over high taxation.
"There is a problem with the wealth tax," Shiller said. "People leave. They take their business elsewhere."
Addressing so-called "capital flight" will be a key issue for advocates of such a tax.
Warren's new proposal, which she hesitated to embrace in 2014, is indicative of the left-ward tilt of the party. Her nascent campaign has focused relentlessly on fighting what she calls a rigged system against the middle class.
Such ideas like hers and Rep. Alexandria Ocasio-Cortez (D., N.Y.) to raise marginal tax rates to 70 percent on incomes over $10 million are gaining increasing footholds among Democrats.