The Real Political Disagreements Between Elizabeth Warren and Bernie Sanders – No. 1 and 3 in Quinnipiac's latest national poll – they are mostly small, and given that, as president, they both would almost certainly face Congress, far from themselves, probably not that significant. But from time to time they diverge in interesting and informative ways.
Take their approaches to wealth tax. Warren promoted the idea, most notably by keeping the concept simple by offering a 2 percent charge on the net worth of a household over $ 50 million to pay for his ambitious social programs. Now Sanders has taken the idea of a logical – and dare I say, some vague conclusion (more on that in a second). Weird reversal of the way the two are usually typed.
Warren made taxing the wealth of the rich at the center of her presidential campaign. On the other hand, she does her best to make the idea sound modest, quirky, emphasizing that it's just a "2 cents" tax on every dollar of wealth (until it reaches 3 cents for billionaires anyway). The senator did not deviate exactly from the language of class war: She calls it an "ultra-millionaire tax," and emphasizes that it will return money from a "small group of families" who have become outrageously wealthy while "the middle class is carved." it already emphasizes it as an idea of common sense for government funding.
"If we put this wealth tax of 2 cents on the 75,000 largest wealth in this country, 2 cents, we can make universal care for every child from 0 to 5, universal pre-K, universal college and give back back student loan debt to 95 percent of our students and still have nearly a trillion dollars, "she said in a typical reef this June. The approach seems to be effective. According to Morning Consult, 61 percent of voters approve of the idea. Even Bill Gates, who is currently the richest man in the world, suggested he would in theory be comfortable with a wealth tax.
On Tuesday, Bernie Sanders introduced his much more aggressive version of the wealth tax. Although the Senator's plan would raise more money than Warren's ($ 4.35 trillion a decade versus $ 2.6 trillion), his presentation does not focus so much on paying for social programs. Instead, he took a loan from the Reverend Alexandria Ocasio-Cortez and the activist left, and ordered a front-line class war. While posting it on Twitter:
Billionaires should not exist. https://t.co/hgR6CeFvLa
– Bernie Sanders (@BernieSanders) September 24, 2019
Or, to put it another way, remove Jeff Bezos.
Now, Sanders' plan wouldn't actually eliminate US billionaires as a class. But as he told the New York Times, it will confiscate "much" of the wealth they currently enjoy. His tax reaches more households than Warren and he takes a bigger bite out of his assets. For married couples, rates will start at 1% on their net worth between $ 32 million and $ 50 million, then rise step by step to 8 percent for all wealth over $ 10 billion.
In other words, far is more aggressive, both in its rhetorical framing and substantially, than that of Warren, as shown in this analysis by the University of California-Berkeley economists Emanuel Saez and Gabriel Zukman, two of the world's leading academic tax advocates. In 2018, Bill Gates was worth approximately $ 97 billion. If Warren's tax had existed since 1982, it would have cost $ 36.4 billion – still undoubtedly rich, but no richer than Harvard, Yale and Princeton combined. However, according to the Sanders tax, Gates' net worth would be a relatively small $ 9.9 billion. It's not about banning billionaires, it's about getting there.
Scope a little further: According to Warren's plan, the wealth of the top 15 richest Americans today will be 54 percent less. According to the Sanders plan, they will be about 80 percent smaller. Here's a good breakdown of Saez and Zucman:
You can see how all this will easily fit into the standard stories of Warren and Sanders. She spoke fondly of plans for fixing capitalism. He spoke morally about the achievement of a democratic socialist revolution. It goes big (forgive most student debt!). It gets bigger (forgive all student debt!).
But on closer inspection, Sanders' account is much more than a moral statement or expression of the idea that when it comes to taxes, it is more. In fact, this is a careful exercise in designing a progressive wealth tax that maximizes revenue by theoretically halting rather than simply slowing the growth of wealth inequalities between billionaires and the middle class.
See Sanders' proposed tax framework for married files. What do you notice?
• $ 32 million to $ 50 million net worth: 1% cap
• $ 50 million to $ 250 million: 2 percent
• $ 250 million to $ 500 million: 3 percent
• 500 million to $ 1 billion: 4 percent
• $ 1 billion to $ 2.5: 5 percent
• $ 2.5 billion to $ 5 billion: 6 percent
• $ 5 billion to $ 10 billion: 7 percent
• More than $ 10 billion: 8 percent
Looks … a little complicated, right? I mean, that's a lot of levels. But when you average all these marginal rates together, Saez and Zucman come to the conclusion that US billionaires will initially pay about 6 percent of the average tax rate on all their wealth.
This number is significant for at least two reasons.
First, it falls right down to the sweet spot when it comes to raising money. In a separate paper, Saez and Zukman showed that the billionaire wealth tax rate of 6.25 percent maximized revenue for the government. Go higher and this will accumulate less money for the government over time, reducing the wealth of the rich. Things get trickier when you consider how the wealth tax interacts with other taxes, but most importantly, Sanders has structured his version to look pretty perfect on a budget forecast. "The Sanders plan essentially increases long-term billionaire revenue collection," Zucman confirmed to me in an email.
Second, a 6 percent average tax rate can stop wealth inequality from deepening, at least through some measures. In recent years, Saez and Zukman have noted that the richest American households are seeing their wealth grow at a rate about 4 percentage points faster per year than the average family. Warren's plan will remove some of that gap. Sanders is said to have wiped it off completely.
So Sanders showed us how rough the income tax could look like, which stops growing inequality. It also makes it easier to imagine the disadvantages of such a policy. (I expect many venture capital and technology type investors to start talking about moving to Canada.) Warren's version may be easier to sell, but compared to Sanders, its tax structure seems a bit arbitrary. If your definition of fiction involves making political decisions to achieve specific goals in the most efficient way possible, it seems pretty clear who this time is.
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