Business Insider: Wealth Tax Explainer: Why Bernie Sanders, Elizabeth Warren and Billionaires Like George Soros Alike Are Calling for a Specialized Tax on the Ultra-Wealthy

The following is an excellent article written by Taylor Nicole Rogers on the Business Insider website on September 24, 2019 titled “Wealth Tax Explainer: Why Bernie Sanders, Elizabeth Warren and Billionaires Like George Soros Alike Are Calling for a Specialized Tax on the Ultra-Wealthy” and I quote:

“Wealth tax explainer: Why Bernie Sanders, Elizabeth Warren and billionaires like George Soros alike are calling for a specialized tax on the ultra-wealthy”

Taylor Nicole Rogers Sep 24, 2019, 1:15 PM

Elizabeth Warren
One of the most frequently cited proposals, Senator Elizabeth Warren’s “Ultra-Millionaire Tax,” calls for a 2% annual tax on households with a net worth between $50 million and $1 billion and a 3% annual tax on households with a net worth over $1 billion. 
  • wealth tax like the one proposed by presidential candidate Sen. Elizabeth Warren would make ultra-wealthy Americans pay the federal government a small percentage of their net worth each year.
  • Sen. Bernie Sanders released his own proposal for a wealth tax on September 24 that his campaign claims would cause “the wealth of billionaires would be cut in half over 15 years.”
  • Former Rep. John Delaney criticized Warren’s proposal as unrealistic during the second round of Democrat primary debates on July 30.
  • Tax experts and billionaires alike have said the revenue from a wealth tax could be used to fight climate change and repair the country’s infrastructure — if the IRS can find a way to enforce it.
  • Despite popular support, a wealth tax bill would have to overcome opposition in both Houses of Congress, the White House, and the Supreme Court before becoming law.
  • Visit Business Insider’s homepage for more stories.

Income inequality in America is a serious problem, and all indications say it’s only getting worse.

Since 1989, the wealthiest 1% of Americans have added $21 trillion to their combined net worths, while the poorest 50% of Americans have seen their combined net worths drop $900 billion, an analysis of Fed data reported in New York Magazine found.

A federal wealth tax is one potential solution that has been touted by presidential candidates and hedge fund billionaires alike. And the idea has support among Americans: An INSIDER poll shows that more than half of Americans support Senator Elizabeth Warren‘s wealth tax proposal.

On September 24, Senator Bernie Sanders released an even more aggressive proposal entitled “The Tax on Extreme Wealth” that promises to cut the wealth of billionaires in half over 15 years. “I don’t think that billionaires should exist,” Sanders said in an interview with The New York Times.

Any wealth tax proposal would face substantial legal challenges. Additionally, the revenue raised by the proposed wealth tax would likely be much lower than its advocates expect, former Department of Justice tax attorney James Mann, who is now a tax partner at law firm Greenspoon Marder, told Business Insider. 

What is a wealth tax?

Today, ultra-wealthy Americans pay taxes on things like superyachts and fine art when they purchase them — but not after. A wealth tax would change that, making them pay taxes on their wealth every year.

One of the most frequently cited proposals, Elizabeth Warren‘s “Ultra-Millionaire Tax,” calls for a 2% annual tax on households with a net worth between $50 million and $1 billion and a 3% annual tax on households with a net worth over $1 billion.

The US has never had a wealth tax, but other countries have implemented them with mixed success. France introduced a wealth tax in 1988 that resulted in a massive capital flight, prompting President Emmanuel Macron to replace the wealth tax in 2017. The tax’s repeal was unpopular and helped spark the country’s yellow jacket protests, according to the Washington Post.

White Rabbit yacht
Today, ultra-wealthy Americans pay taxes on things like superyachts and fine art when they purchase them — but not after. 

What would the benefits of a wealth tax in the US be?

Introducing a wealth tax is one of the few issues that a majority of Americans agree on.

An INSIDER poll from February shows that 54% of Americans support Warren’s plan, while only 19% disapprove of it. Warren’s wealth tax even has the support of some of the billionaires who would be paying it. That includes George Soros, Abigail Disney, and members of the Pritzker and Gund families, who signed an open letter on June 24 outlining their request. Real estate magnate Eli Broad had also separately spoken up in favor of a wealth tax.

Read moreA majority of Americans approve of Elizabeth Warren’s new tax on the wealthy, according to a new poll

The June 24 letter was signed by 19 ultra-wealthy Americans who noted that the revenue raised by the tax could be used to fund environmental initiatives, fuel economic investment, and reduce the cost of health care.

Elizabeth Warren has said that the wealth tax could generate $2.75 trillion in revenue in a decade. She claims that a wealth tax could also help limit growing economic inequality by funding programs that would benefit the poorest Americans, but doesn’t say by how much it will reduce inequality — or how quickly.

irs internal revenue service
Neither Christerson nor Mann believe that the IRS is currently equipped to enforce a wealth tax. 

What are the drawbacks?

The biggest problem with a wealth tax would be figuring out how to enforce it, Deutsche Bank Managing Director of Wealth Management Blanche Lark Christerson told Business Insider. It’s easy for the IRS to figure how much to tax a billionaire’s investment portfolios, Christerson said, but the value of other assets like yachts and fine art are up for interpretation.

Appraising is more of an art than a science, Christerson said, and the IRS would have to verify those appraisals. Neither Christerson nor Mann believes that the IRS is currently equipped to do that.

To make matters worse, ultra-wealthy Americans are so good at finding ways to reduce their tax bill that they would likely be able to find a way around any anti-evasion measures, Eric Hananel, a tax principal at UHY Advisors focusing on high net worth individuals, said. Hananel also said that billionaires might be motivated to move their money outside the country to avoid the tax, hurting the economy in the process.  

Read moreThe IRS pursues fewer cases of tax evasion than it did 10 years ago — and experts fear more people will get away with tax fraud

Mann, Christerson, and Hananel agree that it’s unlikely that a wealth tax would raise as much revenue as its proponents hope, though they did not specify an alternate estimate as to how much it would actually raise. Mann, for his part, noted that it’s impossible to estimate exactly how successful a wealth tax would be without more data.

“These are the people who obviously have access to the most sophisticated financial planners and lawyers and accountants,” Mann said about the ultra-wealthy people who the wealth tax would target, “and I think it’s naive to think that they wouldn’t plan to minimize their wealth tax burden.”

“It’s just when you look at the practical application of how would this really work, it’s hard to imagine that it would work successfully,” Christerson said.

tax forms

How would a wealth tax change my taxes?

Warren estimates that her “Ultra-Millionaire Tax” would only affect the wealthiest 75,000 households in the US. For those families, even figuring out how much they owe will be a massive headache, according to Christerson.

Multi-millionaires and billionaires would need to enlist the help of appraisers to put a price on hard-to-value assets like yachts and jewelry, and then file separate documents with the IRS to pay the tax on them. The whole process would be independent of the current income tax system and likely run on a different schedule, Mann said.

“It would really be like filing an annual estate tax return,” Christerson said. 

This could pose a problem for Americans who have inherited most of their wealth. Many heirs and heiress inherit their fortunes in the form of real estate and fine art, not liquid assets like cash or stocks, according to Christerson. A new tax bill could force them to liquidate.

Little would change in the tax bills for Americans who fall in or below the middle class, Christerson said.

When could we see a wealth tax?

A “pretty seismic change in the political landscape” would be required to add a wealth tax to the tax code, Christerson said. Progressive Democrats would have to gain control of both Houses of Congress and the White House. The constitutionality of such a tax would likely end up debated in front of the Supreme Court as well, according to Mann. 

Alongside her proposal, Warren released a letter from professors at leading law schools arguing that a wealth tax is constitutional based on a clause in Article I Section 8 of the Constitution that allows the federal government to “collect taxes, duties, imposts and excises” as long as they are “uniform throughout the United States.” However, Article I Section 9 prohibits a “capitation, or other direct tax … unless in proportion to the census or enumeration herein before directed to be taken.”

Constitutional scholars disagree about which clause a wealth tax would fall under, Mann said. To Mann, Warren’s plan has one major fault: The letter fails to mention the Supreme Court’s most recent discussion of which taxes are constitutional.

“They talk a lot about Supreme Court cases from 100 years ago. They don’t talk about the most recent one,” Mann said, referencing the 2012 case that briefly upheld Obamacare by classifying it as a tax. However, that decision still doesn’t define how the Supreme Court decides whether or not a tax is constitutional. 

Ultimately, Mann and Christerson agree: The chances of a wealth tax before 2025 are essentially zero.”

(WHILE THE BILLIONAIRES WOULD PROBABLY NOT GET AS MANY FEDERAL INCOME TAX BREAKS, THEY WOULD STILL HAVE PLENTY OF MONEY TO EXIST. LIKE A LOT OF BILLIONAIRES LIKE GEORGE SOROS AND OTHERS ARE PROPOSING. THE REST OF US WOULD BE BETTER OFF AND MORE ABLE TO PURCHASE THE MERCHANDISE WE NEED TO SURVIVE. SO, I SUPPORT DEMOCRATIC SENATOR ELIZABETH WARREN FOR UNITED STATES PRESIDENT FOR 2020’S ELECTION.

La Vern Isely, Progressive, Overtaxed, Independent Middle Class Taxpayer, Public Citizen Member, USAF Veteran, and Lifetime VFW Member

About tim074

I'm a retired dairy farmer that was a member of the National Farmer's Organization (NFO). Before going farming, I spent 4 years in the United States Air Force where I saved up enough money to get my down payment to go farming. I also enjoy writing and reading biographies and I write about myself as well as articles and excerpts I find interesting. I'm specifically interested in finances, particularly in the banking industry because if it wasn't for help from my local Community Bank, I never could have started farming which I was successful at. So, I'm real interested in the Small Business Administration and I know they are the ones creating jobs. I have been a member of Common Cause and am now a member of Public Citizen as well as AARP. I have, in the past, written over 150 articles on the Obama Blog (my.barackobama.com) and I'd like to tie these two sites together. I'm also on Twitter, MySpace and Facebook and find these outlets terrifically interesting particularly what many of these people did concerning the uprising in the Arab world. I believe this is a smaller world than we think it is and my goal is to try to bring people together to live in peace because management needs labor like labor needs management. Up to now, that hasn't been so easy to find.
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