Why Taxing the Ultra-Rich Is Having a Moment
Proposals for a new “wealth tax” are widening the divide between Democrats and Wall Street
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Twenty years ago, Democrats were so cozy with Wall Street that a former Goldman Sachs banker ran the Treasury Department, and President Bill Clinton signed laws gutting regulations meant to rein in the financial industry. Fast-forward to the present, and the Democratic Party is in the midst of a rebranding. Party elites are no longer openly courting the ultra-rich — they want to tax them.
Sen. Elizabeth Warren set the groundwork for a debate in the 2020 presidential primary with her ambitious plan to annually tax estates worth more than $50 million. Former Rep. Beto O’Rourke endorsed the idea a few months later. Sens. Bernie Sanders and Cory Booker came out with an alternative approach to tackling inequality, with plans to expand the existing estate tax (which, under President Donald Trump, has become a shell of its former self). The party’s leftward shift got a further boost from Rep. Alexandria Ocasio-Cortez, who earlier this year proposed a controversial 70% marginal income tax rate.
These proposals represent a significant transformation from even the last presidential primary. And the idea of a wealth tax is popular right now; a recent survey showed 60% of U.S. voters, including over 80% of Democrats, support an extra tax on households worth more than $50 million.
So why is it gaining traction now?
The idea of taxing wealth is not new: The United States taxes wealth at death in the form of the estate tax. Local jurisdictions also tax property, which Americans typically use to accrue wealth. But unlike a property tax, most wealth taxes are broad in scope. They include stocks, bonds, vehicles, art, jewelry, boats, and planes, minus any debts.
The concept caught on in Europe, but it’s since fallen out of favor, in part because the taxes have been easy to evade. Some countries included exemptions to their wealth taxes, and it is simply easier in Europe to avoid taxes by moving abroad. In 1990, 12 countries in Europe had a wealth tax; today, only three do.
More recently, the idea to tax wealth caught fire in the United States thanks to French…
