Presidential candidate Bernie Sanders proposed an annual wealth tax topping out at 8% for the richest Americans, offering the farthest-reaching Democratic plan to pay for expanded government programs and break up concentrated fortunes.
Mr. Sanders’ plan would hit more households and raise more money than the tax proposed by Sen. Elizabeth Warren of Massachusetts, his chief rival for progressive voters. According to an analysis by economists who consulted with both campaigns, Mr. Sanders’ plan would generate $4.35 trillion over a decade, compared with Ms. Warren’s $2.75 trillion.
Mr. Sanders’ plan would increase federal revenue by about 10%, all from around 180,000 households.
“Enough is enough,” Mr. Sanders, a senator from Vermont, said Tuesday. “We are going to take on the billionaire class, substantially reduce wealth inequality in America and stop our democracy from turning into a corrupt oligarchy.”
‘Enough is enough,’ Sen. Sanders said. ‘We are going to take on the billionaire class, substantially reduce wealth inequality in America and stop our democracy from turning into a corrupt oligarchy.’ PHOTO: GERARDO BELLO/ASSOCIATED PRESS
The tax would apply to married couples with net worth of at least $32 million and individuals with net worth of at least $16 million. The rate would start at 1% per year and rise to 8% for married couples with assets of least $10 billion. That 8% rate would mean that megabillionaires who don’t earn at least an 8% return would see their fortunes shrink, and Mr. Sanders said Tuesday that there should be no billionaires.
During this election cycle, Democrats have offered more expansive proposals to tax the super-rich than they did in years past. That is in part a reaction to income and wealth disparities, and it is also an attempt to fill what they see as gaps in the income-tax system.
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Under the current tax code, gains in wealth aren’t taxed as income unless people sell assets and realize gains. Unrealized gains also escape income taxation when a person dies, though the estate tax may still apply.
But implementing a wealth tax would face challenges. Such a change would require new rules and procedures for determining wealth and additional Internal Revenue Service resources to prevent tax avoidance and tax evasion. A wealth tax would also have unknown effects on economic growth and could be declared unconstitutional because courts could declare it a direct tax that would have to be apportioned among states according to their population.
Mr. Sanders calls for imposing an exit tax of up to 60% on wealthy people who renounce their U.S. citizenship. He would also expand the IRS to audit at least 30% of people in the lowest wealth-tax bracket and audit all billionaires every year.
Analysts have questioned whether wealth taxes would actually raise as much money as the campaigns estimate, both because of tax avoidance and because of disagreements over how much wealth is concentrated at the top of the distribution.
“These wealth taxes raise a lot of money, perhaps not as much as the advocates hope,” said Janet Holtzblatt, a senior fellow at the Tax Policy Center, a Washington group run by a former Obama administration official.