Damn the constitutional torpedoes, full speed ahead — for class warriors, anyway. Bernie Sanders refused to let Elizabeth Warren outflank him to the left and has revealed his own wealth-tax proposal as an answer to his ridiculously costly social programs. Warren proposed a 2% wealth tax at $50 million in assets and above, but Sanders wants those with $10 million or more in assets to feel a 3% annual Bern — for starters:
Sanders, a presidential candidate and independent senator from Vermont, offered his blueprint after Sen. Elizabeth Warren (D-Mass.), who has surged in the polls, made a wealth tax one of her signature ideas. Her crowds regularly chant “two cents!” at her rallies when she brings up the idea, a reference to how much the wealthy would have to pay on the dollar.
Sanders’s proposed wealth tax is more aggressive than Warren’s and would raise more money. Warren’s plan calls for levying a 2 percent tax on wealth above $50 million, as well as a 3 percent tax on wealth above $1 billion. The relatively high threshold has helped Warren fend off critiques that large farms could be exposed to the tax.
Sanders would hit more people with the tax and would also significantly increase how much it would take from the very wealthiest, following a pattern in which he has sought to stake out the leftward boundary of the Democratic Party when it comes to policy proposals.
Sanders’s plan introduces a new 1 percent wealth tax on those earning over $32 million, and then increases that rate in a series of steps until it reaches 8 percent for those with more than $10 billion.
Sanders needs to raise more money than Warren because he’s proposing to spend more money — lots more. His Medicare for All proposal alone would cost $32 trillion over the first ten years and then escalate from that point. Bernie also wants to spend $2.5 trillion on a program to “end homelessness,” and another $1.7 trillion to cancel all student debt. He also wants to spend $16 trillion over the next ten years to “decarbonize the economy” along with other Green New Deal initiatives, Issues & Insights editors noted a month ago:
One of the four leading Democrats running for president, Bernie Sanders announced this week that, if elected, he’ll spend $16.3 trillion over the next decade to decarbonize the economy. That’s a big number. But it’s only one of Sanders’ “bold” plans that, when added up, would more than double the size of the federal government.
The details of Sanders’ “Green New Deal” aren’t particularly important. Suffice it to say, the plan is stuffed to the brim with pie-in-the-sky assumptions and massive new government programs. The Democratic senator wants to spend $681 billion on a “vehicle trade-in program,” another $407 billion to replace school buses, $216 billion to replace every truck. That’s all on just one page of his Green New Deal plan.
All told, he wants to dump more than $16 trillion over 10 years on these and other boondoggles.
Add in Medicare for All and we’re close to a $50 trillion agenda over the next ten years. That’s in addition to current federal spending on everything else, where we’re already running trillion-dollar annual deficits regardless of which party is in charge. How much will a wealth tax contribute to this? Er ….
Economists Emmanuel Saez and Gabriel Zucman at the University of California at Berkeley estimate Sanders’s plan would raise $4.35 trillion over 10 years, although conservatives have said such estimates overstate how much can be raised through a wealth tax.
In other words, it won’t even cover 10% of the costs for Sanders’ agenda, in a friendly estimate. Given the nature of static tax analysis used for most of these types of estimates, we can bet that the actual revenue will come in much lower when the wealthy adjust to the new incentives this tax presents. As we can also expect the costs for all these government bureaucracies to be a lot more expensive than the Sanders campaign projects, too.
That’s if the taxes ever get applied at all. It’s not at all clear that Congress has authority to impose a tax on already-taxed wealth, and any attempt would run into a massive legal challenge on constitutionality. The closest one comes to a constitutional precedent is the inheritance tax, but that was upheld on the basis of being transactional, ie, involving a transfer of wealth from one person to another. Others have argued that a wealth tax is constitutional, but it’s safe to say that there’s not a slam-dunk case either way. It might require a constitutional amendment to grant the federal government that authority, and the prospects of having 38 states grant the right to pull wealth out of their state and into the federal government’s hands are bleak at best.
The intent here is clearly punitive more than it is fiscal soundness. Sanders and Warren both want to burnish their class-warrior bona fides by threatening to raid the coffers of the rich. It’s a time-honored populist trope while remaining mathematically and practically impossible to accomplish. But you’d better believe it will sell in the primaries, anyway.