For many, taxes have always been a dreaded and inevitable fact of life. Considering the sheer complexity of the system and the stress that often comes with sending the check off to the government, paying taxes — while being essential to the well-being of our society — is ultimately difficult at times.
But amid the divisive 2020 presidential race, the more liberal members of the Democratic field — notably Sen. Elizabeth Warren, D-Mass., and Sen. Bernie Sanders, I-Vt. — have proposed a dramatic new measure dubbed the “Wealth Tax.” This proposal would bring our government even more tax revenue, trillions of dollars more, as the proposals have outlined.
While our federal government has generally taxed income and property, among other common and current sources of tax revenue, the wealth tax would be a new measure never before enacted in the United States. Differing heavily from present-day methods of taxation, the wealth tax would target only the top 0.1 percent of Americans, taking a considerable chunk of those taxpayers’ total income each year. Under Warren’s more modest, though nonetheless worrisome plan, the government would collect nearly $3 trillion over a 10 year period from this measure, while Sanders’ more ambitious actions would produce even more, cutting the wealth of billionaires in half over a 15 year period, as stated on his website.
The truth is, what Warren and Sanders are addressing is a serious issue in our nation, with real and concerning economic and societal implications. Income inequality continues to deepen; with the top 1 percent of Americans holding nearly 40 percent of total wealth, and the bottom 90 percent holding only about a quarter, according to research published in a May 2019 Business Insider article. A wealth tax would in theory work against this destructive inequality, taking from the top of the top and lifting up the rest of American society through beneficial programs. As theorized by the Institute on Taxation and Economic Policy, the measure “would raise revenue to make public investments and curb growing inequality among Americans.”
However, while millions of Americans are undoubtedly suffering disproportionately compared to the top income-earners, the wealth tax is ultimately not the answer. Many in this nation may support enacting it, as recent data suggests, but this seems to come from a common, unwarranted sense of unity against the wealthiest taxpayers.
The staggering divide is surely disturbing, but it doesn’t justify going after the top 0.1 percent. On the contrary, this wealthy taxbase is one of the powerhouses of our economy, serving as a significant source of investment that works to stimulate economic activity and benefit all. Forcing billionaires and others to hand over large portions of their net worths would surely reduce business investment, consequently slowing our economy and hurting everybody.
“You’re going to completely disincentivize capital investment, which is going to be very, very bad for economic growth,” Treasury Secretary Steven Mnuchin said to the New York Times in an interview from September. In the end, what Warren, Sanders and others are proposing would directly cut off one of the greatest stimulants in our economic system.
Furthermore, the wealth tax would rapidly punish the innovation and audacity that have fostered such great advances in our country. Why would a wealthy business owner set out to invent and sell a revolutionary product if they knew that they could one day be penalized for making significant profits? Under a wealth tax, there would be fewer incentives to produce and improve on many of the technological leaps of our lifetimes for fear of getting significantly wealthy, only to have a sizable chunk of these earnings taken away. There are few entrepreneurs who would one day want to see as much as half of their wealth taken from them by our federal government. The wealth tax is really an un-American measure disguised as a beneficial one that will work to undermine the spirit of hard work that defines our respected free market economy.
And moreover, the tax is not the necessity that Warren and Sanders market it as. Proponents claim that we need the additional revenue, but there is great evidence that the federal government has mismanaged its current tax revenue for years. For the war on terror, a widely criticized effort, our federal government spent nearly $2.5 trillion, an amount that could have likely been significantly reduced with better leadership. There is far too much fraud, waste and misallocation of resources in our government’s current operations to consider pumping even more revenue into the system. We all would be much better off supporting a dramatic restructuring of our leaders’ current spending habits before we attempt to weaken one of the key drivers of our economy.
Without a doubt, we have much work to do to address the disturbing income inequality rampant in our society, something we have unfortunately grappled with for generations. But in a nation that has often been admired for its great inventiveness, we surely have the power in us to tackle our problems without killing that same spirit of innovation in the process.
Evan Stern can be reached at firstname.lastname@example.org.