Pros and Cons of the Wealth Tax
JEC NASHVILLE — In recent days, New Jersey’s Democrat Governor, Phil Murray, enforced a 10.75% tax on the wealthy. New Jersey’s “millionaires tax” surfaces after major economic suffering in a state with numerous COVID-19 cases and harsh lockdown restrictions (Tully). But, New Jersey is not the only state in the United States that has pondered the idea of a wealth tax. Hawaii and Connecticut have also slammed down taxes on their wealthier citizens even prior to the economic monstrosities of the 2020 Coronavirus Pandemic (“States Expanding Opportunity Through Wealth Taxes”).
As obvious pushback arises over this new “millionaires tax”, the question arises: does a wealth tax even work?
Pros:
Democrats in the United States have been and are advocating for a nationwide tax on the wealthy. They believe that positive growth would come out of wealth taxes and a tax on the wealthy would bind the sharp divide between those in wealth and poverty.
Democrat leaders like Massachusetts Sen. Elizabeth Warren and Vermont Sen. Bernie Sanders, in particular, are the largest advocates for the wealth tax.
According to a New York Times poll, a wealth tax has a positive response. The poll claimed that “two-thirds of all Americans, including 55% of Republicans, approved of a 2% wealth tax on all people with $50 million” (Kurtzleben).
Here are several “pros” that some American citizens, governmental leaders, and business peoples advocate for:
- A wealth tax is a fight against inequality and is set in an attempt to sever the divide between the rich and poor (Li, Smith).
- “The racial wealth gap is far more dramatic because it is a result of generations of compounded inequality” (Wamhoff).
- “… the wealthiest 0.1 percent held nearly as much wealth as the bottom 90 percent…” (Wamhoff).
Cons:
The obvious goal of the wealth tax is to find equilibrium between the rich and the poor. Yet, that equilibrium is never truly achieved.
Europe attempted the wealth tax roughly thirty years prior to Phil Murray. Twelve countries began their journey into wealth tax and delve into taxes on their citizens' personal holdings; cars, valuables, etc. For example, 1982’s President François Mitterrand taxed citizens with net worth’s of over three-million francs, a little over half a million US Dollars. Recently, France’s president Macron released that burden on France’s wealthy class (Andelman).
Out of those twelve European countries that imposed the wealth tax, only three remain today (Andelman). And what did the wealth tax accomplish? Nothing.
A more relevant example of the “cons” of the wealth tax is in California. In mid-August, the California legislature coalesced to pass a wealth tax. But, as expected, the wealthy Californians did not seem to have a positive response.
Assemblyman Rob Bonta (D-Oakland) joined Fox Business Network’s Neil Cavuto to discuss the new wealth tax. Bonta explained how “The California Wealth Tax would apply a 0.4% tax on the portion of a taxpayer’s net worth that exceeds $30 million.” Bonta then put the blame onto the COVID-19, saying “Families are hurting right now…Californians must step up and contribute their fair share.” He claimed that California's goal was to rid the state of “excessive wealth” (Grimes). Nevertheless, the wealth tax has caused many Californians, notably celebrities like Joe Rogan and Ben Shapiro, to “bolt” out of California to southern, Republican states who don’t enforce high taxes (Creitz).
But, not just the rich have ditched California for Republican states. Many small business owners and entrepreneurs have hit the road to flee from high taxes. The reason for this being: they cannot survive the high tax rates, and wealth tax “kills jobs and slow[s] economic growth” (Gallagher).
Conclusion:
The wealth tax has its pros and cons, but does one outway the other? US Government and States’ leaders are delving into the topic themselves and leaders on all spectrums of the political and economical world are disputing the pros and cons of the infamous wealth tax.
