Article on her tax plan. I have no problem with everyone paying their fair share of taxes... Why Elizabeth Warren’s Wealth Tax Would Work By John CassidyJanuary 31, 2019 In 1995, Edward Wolff, an economist at N.Y.U., published a short book called “Top Heavy,” which detailed the increasingly alarming concentration of wealth in the United States, and warned of the threat that it posed to American democracy, as the ultra-rich sought to exercise more political power. At the time, the richest one per cent of families controlled about forty per cent of all household wealth—defined as stocks, bonds, other financial assets, equity in private businesses, trusts, real estate, and bank deposits—while much of the population had virtually no wealth at all once debts and mortgages were taken into account. To address this disparity, Wolff called for the introduction of an annual tax on wealth. Aware that this might be considered a radical idea, he kept his proposed tax rates at pretty low levels. Under his plan, households with a net worth of a hundred thousand dollars would pay five cents in tax on every hundred dollars of their wealth; the rate would rise to thirty cents per hundred dollars for households worth a million dollars or more. (Back then, about three per cent of U.S. households fell into the latter bracket.) Despite the modest scale of Wolff’s proposal, it didn’t get much traction in the policy world. Prior to publishing the book, he did have a lunch meeting with Bill Bradley, the Democratic senator from New Jersey, where they discussed the idea, but that was as far as it went. “He sounded enthusiastic at the lunch, but when push came to shove he walked away,” Wolff recalled when I spoke with him earlier this week. “He thought that politically it was dynamite.” Twenty-five years later, how have things changed? Last week, Senator Elizabeth Warren, the Democratic Presidential candidate, put forward a wealth tax that would be much bigger than the one Wolff proposed but also much more narrowly focussed. Under Warren’s plan, the tax rate on wealth would be two per cent, but it would only apply to American households worth at least fifty million dollars, of which there are fewer than eighty thousand. Fortunes of a billion dollars or more would be taxed at three per cent—ten times the top rate in Wolff’s plan. Not everyone is thrilled about Warren’s proposal, of course. During a visit to New Hampshire, Mike Bloomberg, who is considering running for President in 2020, as a Democrat, claimed that Warren’s proposal was unconstitutional and brought up Venezuela. Howard Schultz, the former Starbucks C.E.O. who is thinking of entering the Presidential race as an Independent, called the Warren plan “ridiculous.” On Capitol Hill, meanwhile, Mitch McConnell and two other Republican senators said that they would introduce a bill to repeal the federal estate tax, a type of wealth tax that has already been so weakened that it now hits fewer than two thousand families a year. So much for billionaires and Republicans. But many moderate and progressive Democrats, far from recoiling from the Warren proposal, enthusiastically embraced it. “Wealth inequality in our nation is a national scandal,” Gene Sperling, a veteran Democratic policy wonk who served as a top economic adviser to Bill Clinton and Barack Obama, wrote on Twitter. “This type of wealth tax that @SenWarren is proposing is essential. It frees up dramatic amounts of resources that make it more likely the vast number Americans can have economic security & a shot at their own small nest egg.” continued...
Since the publication of “Top Heavy,” the share of income and wealth going to the top one per cent, and especially the top 0.1 per cent, has risen a good deal further, while the wages and incomes of regular American households have stagnated. Meanwhile, the Citizens United ruling, the rise of super PACs, and the lurch to the right of the Republican Party and, of course, the Trump Presidency have demonstrated the growing political power of the billionaire class, throwing into sharper relief Wolff’s point that “the current tax system in the United States leaves these vast differences in wealth and power largely untouched.” Seth Hanlon, another former economic aide to Obama, who is now a senior fellow at the Center for American Progress, told me, “It is essential that we do something bold to get at our tax code’s failure to tax major accumulations of wealth. It is terrific that she”—Warren—“has put it on the table.” In many policy circles, where taxing wealth is widely seen as an idea whose time has come, the debate is shifting to practicalities. Bill Gale, a senior fellow at the Brookings Institution, who worked at the White House Council of Economic Advisers under President George H. W. Bush, told me that taxing wealth more effectively can be justified on at least four different grounds: equity (in some cases, as Warren Buffett famously pointed out, the very richest American households pay a smaller share of their income in tax than middle-income households do); revenues (even though the unemployment rate is at a historic low, the budget deficit stands at more than 4.5 per cent of G.D.P.); “rent-seeking” (by manipulating compensation committees, many C.E.O.s effectively set their own compensation); and the desire to prevent the further emergence of a plutocracy. (By some estimates, the top 0.1 per cent now controls almost as much wealth as the bottom ninety per cent of households.) “I am sympathetic to the idea of a wealth tax,” Gale said. “It is certainly not a crazy notion, but I don’t know if it would work.” Part of the problem is that other countries have shown that wealth taxes create incentives for rich people to evade them by sheltering or hiding assets, or, in extremis, by emigrating. France and Denmark both got rid of wealth taxes on investments and other non-property assets, partly because they didn’t raise as much money as was hoped. Gabriel Zucman and Emmanuel Saez, two Berkeley economists who provided a detailed assessment of the Warren tax plan, estimate it would raise $2.75 trillion over ten years, which is a very large sum. But Wojciech Kopczuk, an economist at Columbia University who has studied the estate tax extensively, told me that the $2.75 trillion figure is “wildly optimistic.” If Warren’s tax were enacted, Kopczuk said, many wealthy families would divide their wealth among themselves to stay under the fifty-million-dollar threshold, and they would also start shifting their wealth into assets that are hard to value, such as collectibles and privately held businesses. “I think that they”—Saez and Zucman—“are assuming that there is more wealth than there is, and they are underestimating the amount of tax planning that will take place,” Kopczuk said. “I am sure that the tax lawyers and tax accountants have ideas already.” Economists who have looked into tax avoidance have reached differing conclusions. A recent study of Switzerland, which has long administered a wealth tax at the level of individual cantons, found that a “0.1 percentage-point increase in wealth taxes leads to 3.4% lower wealth holdings in the cross canton data.” That’s a big impact. “When you tax people’s wealth, they manage to somehow reduce their taxable wealth,” Jonathan Gruber, an M.I.T. economist who was one of the authors of the study, told NBC News. “We don’t know if it’s by saving less or by hiding it.” Gruber added, “Elizabeth Warren’s tax would raise money, it’s a question of how much.” Given the practical challenges involved in taxing wealth directly, some economists, Kopczuk included, favor an alternative approach of reforming two existing taxes: the capital-gains tax and the estate tax. At the moment, many rich people largely avoid the capital-gains tax by holding on to their appreciated assets until they die, and then passing them on to their heirs, whose liability is greatly reduced because of a loophole in the tax code known as a “step-up in basis.” Moreover, the top rate of capital-gains tax has been reduced over the years. It is currently at 23.9 per cent, which is a lot lower than the top rate of income tax. In theory, there is nothing to prevent Congress from abolishing the “step-up in basis” loophole and raising the capital-gains tax rate. In 2016, the Obama Administration suggested doing both of these things, but the Republicans who controlled Congress ignored the proposal. Theoretically, we could go even further in this direction, forcing taxpayers to declare their over-all wealth every year on the basis of market prices, and making them pay the capital-gains tax on any increase over the previous year. “That’s the obvious thing to do,” Kopczuk said. “You can go much further in the direction of taxing wealth accruals on an annual basis, compared to what we are doing now.” continued...
As the election campaign moves along, critics of Warren’s proposal are sure to repeat these types of arguments. But the designers and supporters of the Warren plan have already anticipated many of them, including the issue of tax evasion and avoidance. In their written assessment of the Warren proposal, Saez and Zucman assume that “households subject to the wealth tax are able to reduce their reported net worth by 15% through a combination of tax evasion and tax avoidance.” The $2.75 trillion revenue projection takes this level of evasion into account. Saez and Zucman didn’t pluck the fifteen-per-cent estimate from thin air. They obtained it by averaging the results of four academic studies of wealth taxation, in Colombia, Denmark, Sweden, and Switzerland. In their written assessment, Saez and Zucman raise some technical questions about the study in Switzerland, which contained a much higher estimate for tax evasion than the other three countries. “Switzerland has no systematic third party reporting of assets,” the authors noted, “which can . . . make tax evasion responses larger than in Scandinavia.” When I spoke with Zucman on Wednesday, he argued that the fifteen-per-cent estimate for tax avoidance in the case of the Warren wealth tax could well be too high, because the European wealth taxes weren’t directly comparable to the U.S. “They had all sorts of exemptions and loopholes for certain types of assets, which is what makes tax avoidance possible and incentivizes it,” Zucman said. “The lesson we draw is that for a wealth tax to work well, it has to be comprehensive. In the case of the Warren wealth tax, it is very clear that there are no exemptions whatsoever. That is why we are confident in our scoring.” In their assessment, Saez and Zucman also pointed out that the Warren tax plan would be “well enforced through a combination of systematic third party reporting and audits.” The proposal features a “significant increase” in the enforcement budget for the I.R.S. and a minimum audit rate for households subject to the new levy. To deter the ultra-rich from fleeing to countries without a wealth tax, it also includes a punitive “exit tax” of forty per cent on “the net worth above $50 million of any U.S. citizen who renounces their citizenship.” Tax avoidance “is not something that happens out of the blue,” Zucman said. “It is something that policymakers can encourage or discourage.” In fact, some important preventive steps have already been taken, particularly relating to the use of offshore tax havens. Not very long ago, rich people could simply set up bank or brokerage accounts in places like the Bahamas, Panama, and Switzerland, secure in the knowledge that they would be beyond the reach of the I.R.S. But, since the passage of the Foreign Account Tax Compliance Act (FATCA), in 2014, foreign financial institutions are legally obligated to identify accounts held by U.S. citizens and report details about them to the I.R.S.; failure to do so can lead to heavy fines. The enactment of FATCA has “dramatically improved our ability to uncover hidden, offshore accounts,” Lily Batchelder, a law professor at N.Y.U. who previously worked in the Obama White House and as the chief tax counsel to the Senate Finance Committee, pointed out on Twitter. It’s also worth remembering that eliminating evasion completely is an unrealistic goal for any tax. Bill Gale pointed me to estimates from the I.R.S. that the rate of evasion of the income tax is sixteen per cent, and the rate of evasion from taxes on sole proprietor businesses is sixty-four per cent. “The fact that there is some evidence of evasion doesn’t make a wealth tax any different from any other tax,” Gale said. The issue is whether evasion and avoidance can be held to a reasonable level. With a comprehensive base and a rigorous system of enforcement, the Warren tax may well meet that standard. In any case, alternative approaches to taxing wealth, such as taxing annual accruals, would face similar challenges. If we adopted this model rich taxpayers would still have to declare the total value of their assets to the I.R.S. To make the system work, there would need to be third-party appraisals and regular audits. Another important issue is whether relying on enhanced capital-gains taxes could match the revenues from Warren’s tax. The Joint Committee on Taxation estimated that the Obama proposal to eliminate the step-up in basis and raise the capital-gains tax rate would have raised about two hundred and forty billion dollars over ten years; that’s less than a tenth of the $2.75 trillion figure that Saez and Zucman project. Levying an annual capital-gains tax on accruals rather than on actual asset sales would certainly increase the revenue yields, but by how much? Zucman pointed out that the revenues would be volatile, because they would vary with asset prices, and no other country has shifted to this type of system, so it is hard to know how it would work out. “To me, it sounds like more of a pipe dream,” he said. Edward Wolff, who a quarter of a century ago saw his wealth-tax proposal go nowhere, and who in 2017 published a monumental historical study of wealth in the United States, is watching the current debate with a combination of wry amusement and encouragement. During our conversation, he pointed out that there isn’t any reason why some version of the Warren proposal couldn’t be combined with other proposals being canvassed, such as reforming the capital-gains tax and the estate tax, and raising the top rate of income tax—as Representative Alexandria Ocasio-Cortez has advocated. “From the point of view of fairness, you want to tax people based on their ability to pay,” he said. “Income itself doesn’t give you a good indicator of ability to pay. Some combination of income and wealth is better.” Zucman agrees. “The ideal tax system would have a progressive income tax, a progressive estate tax, and a progressive annual tax on wealth,” he said. “They all do different things, and they complement each other.”
So this guy is in favor of people paying taxes on fictitious paper gains each year? So much for long-term investing. If a stock rose 10% in one year, the stockholders would be taxed on that paper gain. When it dropped 10% the next year, would they get an offsetting loss? Imagine the flight from stocks and the corresponding loss in capital for companies. And would it apply to homes? If someone tells you your home accumulates in value over the course of a year, would they charge you the capital gains rate (currently up to 23%) on that fictitious gain in the value of your house? Would you owe that year after year if your home (at least on paper and in the opinion of some government paid appraiser) becomes more valuable? People would be driven from their homes (which MUCH lower property taxes have been known to do.) Would it apply to all kinds of investments? Who would buy property? Who would own a business? "Pipe dream" is a nice word for it.
More on "Warren's Folly" at City Journal. "The wealth tax is more likely to be considered a direct tax, and enacting a workable direct tax is hard to do—intentionally so. The Founders worried that Congress might use the relatively dangerous direct taxes as everyday revenue-raisers. To prevent abuse, the Constitution requires apportioning a direct tax among the states based on population: regardless of how the tax base is distributed across the country, taxpayers in each state in the aggregate must pay tax in proportion to their state’s share of the national population. The apportionment rule makes imposition of a direct tax often technically—and politically—impossible. That’s not a glitch, as some suggest; that was the point. "Suppose Warren’s wealth tax had to be apportioned. Imagine two states—one rich, one poor—each having a population of, say, 2 million. Despite the disparity in wealth, the tax collected from the two states must be the same. To make the numbers work, either tax rates would have to be higher in the poorer state than in the richer one, or some other absurd mechanism would have to be used. The result would obviously not satisfy Senator Warren’s goals. If apportionment is required, the proposed tax is dead in the water." https://www.city-journal.org/elizabeth-warren-wealth-tax
very good summary of the wealth tax: "Targeted ultra-high net worth wealth taxes can fund reductions in taxes on wages. Wealth taxes are harder to avoid than existing capital gains taxes and inheritance taxes, and can be more precisely targeted toward extreme wealth. Exit taxes to prevent capital flight are consistent with business law principles governing partnerships. Valuation disputes can be managed through existing property tax mechanisms and through private law provisions called 'shotgun clauses.' "Most experts believe that wealth taxes are constitutional. The critical difference between wealth taxes and income taxes, the realization requirement, exists for administrative convenience, not as a constitutional requirement. Constitutional challenges can be discouraged by including in wealth tax legislation a savings clause that would create as a backup an economically equivalent income tax." https://taxprof.typepad.com/taxprof_blog/2019/02/simkovic-billionaire-taxes.html#more
What are your priorities for the new tax money? That is where I differ with most on the far left, not the fact we need to close tax loopholes and make sure excess wealth is accounted for.
News out today that Elizabeth Warren listed herself as Native American on her Texas Bar registration card in 1986. She filled it out herself, no one to blame here, no administration staff to say messed up.
She didn’t gain any benefit by listing herself as Native American on her Texas Bar registration. It is odd though.... just really bizarre.
The point is that a defense Has been that she just casually mentions Native American ties and that Harvard ran with it on their own. That she never chose to list herself that way. This destroys that narrative and shows that she presented herself as Native American
How. The point of the narrative is that she advanced her career using that claim. The bar Is an exam. It's a pass/fail exam. Race doesn't matter and future prospective employers don't use the ethnicity claim on a bar exam in their hiring proccess. Her first law proffesor gig at a elite law school(UPenn), she explicitly put on her application that she was White/Caucasian and nothing else.
The argument was she advanced her career elsewhere by claiming to be a native american, with the accusation being that she may have claimed to be a minority to get preferential treatment in academia. (I understand there is no proof that she ever got that preferential treatment.) This accusation emerged because Harvard celebrated her as a Native American staff member. Her defense of that was that she never claimed to be a Native American on any paperwork, that Harvard or some assistant just kind of ran with it because she talked about her heritage. What this new evidence does is demonstrate that she actually does have a history of listing herself as a native american on official paperwork. It calls into question the idea that Harvard calling her a Native American was really just some innocent misunderstanding and makes it more likely that she really just listed herself that way which makes her disingenuous about this whole thing. All of this is her fault. She handled this so stupidly. She could have killed this story from the start by saying "my family always claimed we had a native american history. I was proud of that history and am still proud of it today. Like many American families, I grew up in an era before 23 and me haha. We believed the stories that were told to us by our parents. It's possible that there was a misunderstanding or bad information. I really can't be sure." or something like that. Instead she had to turn this into a big deal.
She never claimed to be native on HIRING applications. We already know this at least with UPenn as they have explicitly confirmed that she listed only "white" as her ethnicity on her application for UPenn . This kinda proves that you haven't followed her election bids in Massachusetts against her GOP opponents. She NEVER brought up her ethnic heritage until her GOP politician heard rumors and started blasting it as central campaign rhetoric. Her retort? EXACTLY what you wanted her to say. She did say that this was what her mom and grandmother told her. Recently she decided to to the test. I'm sure it took her a few months to proccess the unfortunate results for her in her head because it is something that her own mother and grandmother claimed and she probably holds those people really dear and now she admits she was wrong. She has NEVER used it as a "vote for me because I'm ethnic" shtick and she never used it to advance her career.
So why did Harvard list her as a Native American and celebrate her as proof of their diversity? That's why this stinks. The claim that she doesn't know why they did that, must have been some innocent mistake by an assistant looks dubious when she filled it out on her bar application.
