Senator Bernie Sanders released a proposal Tuesday for a wealth tax designed to raise trillions of dollars while significantly reducing the fortunes of some of America’s richest households.
Saying he wants “to reduce the outrageous level of inequality that exists in America today,” Sanders proposes to establish what he calls a “tax on extreme wealth” — an annual tax on the wealthiest 0.1% in the U.S., or some 180,000 households with a net worth above $32 million.
The money raised by the tax — $4.35 trillion over a decade, according to the proposal — would be used to help pay for new social welfare programs, including Medicare for All, universal childcare and affordable housing.
Here’s how Sanders’ proposed wealth tax would work:
- 1% tax on net worth of more than $32 million for a married couple
- 2% from $50 million to $250 million
- 3% from $250 million to $500 million
- 4% from $500 million to $1 billion
- 5% from $1 billion to $2.5 billion
- 6% from $2.5 billion to $5 billion
- 7% from $5 billion to $10 billion
- 8% on wealth over $10 billion
In keeping with Sanders’ view that the very existence of billionaires is a problem — “I don’t think that billionaires should exist,” Sanders told The New York Times — the tax would hit the wealthiest especially hard. Amazon founder Jeff Bezos, for example, would pay $9 billion in taxes this year under the plan, according to CNBC.
More than just money: The Sanders campaign claims that the tax would reduce the wealth of billionaires by 50% in 15 years, as part of its effort to “reduce wealth inequality in America and stop our democracy from turning into a corrupt oligarchy.” The Wall Street Journal’s Richard Rubin highlighted the effect the tax would have on great wealth: “An 8% or 5% wealth tax doesn't sound big. When the base is net worth, it's a lot. For some, it's equivalent to a tax rate over 100% on income. To advocates, that's a feature, not a bug--a goal here is eroding fortunes.”
New rules and enforcement: In order to address the problem of potential tax evasion, Sanders calls for the creation of a “national wealth registry” as well as additional third-party reporting requirements. Americans who leave the country would face a 40% wealth tax on assets under $1 billion and a 60% tax on assets above that level. And the IRS would receive increased funding to audit 30% of tax returns among the top 1% and 100% of returns for billionaires.
Dueling wealth taxes: Sanders’ proposal goes further than one offered by Elizabeth Warren, whose proposal would impose a 2% tax on households with assets worth more than $50 million and a 3% tax on households with assets worth more than $1 billion, producing an estimated $2.75 trillion over 10 years.
Presidential primary politics: Sanders released his proposal as new polls show Warren surging in Iowa and New Hampshire. Sanders is trying to remind voters that he is still very much in the race, Axios’s Mike Allen suspects — and is trying to show that he has a plan to raise money to pay for the trillions of dollars’ worth of proposals he has made during the campaign.
Plenty of challenges: Tax experts have questioned whether wealth taxes can deliver the kinds of revenues their proponents project, with many arguing that tax avoidance strategies and enforcement issues would sharply reduce the actual amount. (Economist Greg Mankiw recently outlined one such strategy.) And if the tax does succeed, it could create longer-term shortfalls. "A wealth tax of this magnitude would tend to shrink the amount of wealth held by billionaires over time," Kyle Pomerleau, chief economist at the conservative Tax Foundation, told the Associated Press. "So he may be able to make his plans add up in the short run, but it becomes more questionable over time as the wealth tax raises less and less." To Sanders, that again is a feature, not a bug. Even so, there are also serious questions about the legality of a wealth tax, which would almost certainly be challenged on constitutional grounds, were it ever to become law.