Presidential hopeful Sen. Bernie Sanders (I., Vt.) debuted a proposal to directly tax the wealth of America's richest families at an even higher rate than primary rival Sen. Elizabeth Warren (D., Mass.).
Sanders introduced an expansive wealth tax on Tuesday. The proposal is even more aggressive than that of the Warren campaign. It would levy a progressive wealth tax, starting at 1 percent for fortunes valued between $32 to $50 million and up to 8 percent on those in excess of $10 billion. That makes for a much more aggressive scheme than Warren's plan, which has just two brackets: a 2 percent tax on wealth in excess of $50 million and a 3 percent tax on wealth in excess of $1 billion.
A wealth tax is a direct tax levied on the assets a person holds. This makes it distinct from many other taxes, such as income or sales, which are levied when money or assets change hands. Under Sanders's plan, a tax would be levied on an individual reported net worth. To see that the wealth tax is actually paid, the Sanders campaign also called for harsher enforcement mechanisms. That includes the establishment of a "national wealth registry," although what or who would be "registered" under such a system remains unclear.
The Sanders campaign projects that its wealth tax would produce about $4.35 trillion in added revenue over the next decade. While it would drastically drive up tax collections, it would still be just a fraction of the cost of Sanders's spending plans such as Medicare for All. While Warren has touted the tax to fund her agenda, the primary purpose of Sanders's proposal is to correct what his campaign called the "outrageous level of inequality that exists in America today and to rebuild the disappearing middle class."
Sanders, like Warren, developed his wealth tax plan in consultation with University of California, Berkeley economists Gabriel Zucman and Emmanuel Saez. The pair are among the most important left-leaning economists alive today, and their work on measuring economic inequality—with fellow economist and best-selling author Thomas Piketty—is widely cited by progressives. It is also extremely controversial—subsequent research argues that the trio substantially overestimates wealth inequality.
While Sanders's wealth tax plan is more aggressive than Warren's, it suffers from the same potential pitfalls the Washington Free Beacon identified in speaking to experts about Warren's plan. Other OECD nations have largely moved away from wealth taxes, citing their limited contribution to total revenue and tendency to depress foreign investment. Wealth taxes also discourage domestic investors, who respond to lowered expected returns by directly investing less of their money, thereby indirectly slowing economic growth.
Sanders's version comes as Warren has risen in the polls, threatening the Vermont senator's status as the progressive alternative to former Vice President Joe Biden.