Millionaire (and billionaire) taxes: An idea whose time has come?
The idea of hiking taxes on the richest Americans is having its moment. Leading Democrats in Congress, including some expected to run for president in 2020, are floating proposals. Respected experts on inequality are preaching the gospel of redistributing wealth. Even the country's most prominent banker, JPMorgan Chase CEO Jamie Dimon, endorses the concept.
And the public? They're game, too -- and by a wide margin. The issue is rekindling an old debate between advocates for a progressive wealth tax who say it would raise federal revenue while shrinking the gap between rich and poor, and detractors who argue it would demoralize "job creators" and discourage investment.
The question now: Will the debate over raising taxes on the rich crystallize into a serious policy push or crash on the shoals of partisanship in Washington?
Bipartisan public support
Seventy-six percent of registered voters agree that the wealthiest Americans should pay more in taxes, according to a Politico/Morning Consult poll released this week. A recent Fox News survey found that 70 percent of respondents -- including 54 percent of Republicans -- expressed support for raising taxes on those who earn more than $10 million a year.
Potential presidential candidate Sen. Elizabeth Warren is among the high-profile Democrats who have drawn support for their proposals to increase taxes on the rich. Her "Ultra-Millionaire Tax," aimed at the richest 0.1 percent of Americans, would impose a 2 percent wealth tax on individuals with average gross annual income of $7.3 million and net worth more than $50 million; people worth $1 billion and up would see a wealth tax of 3 percent.
"For decades, a small group of families has raked in a massive amount of the wealth American workers have produced, while America's middle class has been hollowed out. The result is an extreme concentration of wealth no seen in any other leading economy," the Massachusetts Democrat said in introducing the bill.
President Donald Trump's chief economic adviser, Larry Kudlow, on Thursday articulated the perspective found among many conservatives.
"The top quarter of income earners pays 87 percent -- please don't tell me they don't pay their fair share," he told reporters outside the White House. "The top 1 percent pays more than the bottom 90 percent. Pardon me for this editorial. But I do not want to see prosperity killing job killing incentive killing policies."
A salve for inequality, backers say
Backers of Warren's proposal say it would help curb inequality, which has been on the rise in the U.S. since the 1980s, when Ronald Reagan began hacking tax rates.
"The result has been a boom in top incomes of the richest Americans," Eileen Applebaum, co-director of the Center for Economic Policy and Research, a liberal-leaning think tank, said Wednesday at a panel in Washington hosted by the Congressional Progressive Caucus to discuss tax policy.
University of California Berkeley economists Emmanuel Saez and Gabriel Zucman, two of the leading scholars on inequality, estimate that Warren's wealth tax would affect an estimated 75,000 American households and would raise around $2.7 trillion over 10 years.
"The point of high top marginal income tax rates is to constrain the immoderate, and especially unmerited, accumulation of riches," they wrote last month in a New York Times op-ed.
Other plans take aim at the richest Americans' income, rather than their wealth (which factors in all of a person's assets and debt). Rep. Alexandria Ocasio-Cortez, D-New York, in January said the government should tax incomes exceeding $10 million at a rate of 70 percent, a policy she said would help fund a "Green New Deal" in the fight against climate change.
The current top tax rate in the U.S. peaks at 37 percent on earnings above $510,300 for individuals and $612,350 for couples, according to the Tax Foundation.
A Hill-HarrisX survey shows that 59 percent of Americans support Ocasio-Cortez's proposal.
Sen. Bernie Sanders, I-Vermont, is another progressive voice calling for increasing federal tax rates for the wealthiest Americans. Sanders, who many expect to run for president in 2020, favors a top tax rate of 77 percent on estates worth more than $1 billion; that would affect the wealthiest 0.2 percent of Americans.
"We are not taking care of ourselves... and we are falling farther and farther behind what normal countries all over the place are achieving," Columbia University economist Jeffrey Sachs said at the Congressional Progressive Caucus event, pointing to Canada and to Scandanavian countries, where the top marginal tax rates exceed 45 percent.
Uber-rich for a tax hike
Some wealthy Americans are weighing in, too -- in favor of higher taxes. JPMorgan Chase's Dimon, who is reportedly a billionaire, said people in his income bracket can and should pay more, as long as the revenue is used effectively.
"Individuals earning the most can afford to pay more, and I have no problem paying higher taxes to address some of the fundamental challenges and inequities in our society," Dimon recently told Bloomberg.
Investor Warren Buffett has also long called for a tax hike on the wealthy. In a 2011 op-ed for The New York Times, he wrote that most of his mega-rich friends "wouldn't mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering."
He also dismissed detractors' notion that higher tax rates discourage investment. "People invest to make money, and potential taxes have never scared them off," he said.
A road to nowhere?
Despite the recent hubbub over proposals to jack up tax rates on the rich, they're probably not going anywhere, according to economist Martin Sullivan.
"It's highly unlikely that there is any chance of enactment," he said. "The only scenario in which it could be enacted is if in 2020 the Democrats took control of both houses and the White House. And even if that did occur, it would still be highly unlikely because of better alternatives and because of the inability to administer such a tax as a wealth tax," he said.
He outlined some of the challenges associated with enforcing a wealth tax, including closing loopholes and accurately assessing how much individuals are worth.
"It's politically useful for Democrats to talk about taxing the rich more, and this is a dramatic way of drawing attention to that," Sullivan said. "However, as a practical matter I wouldn't waste much time on it."