All the news right now is about the potential impeachment of President Donald Tump. We just talked about that last week and did a poll on the subject, so let’s let it percolate a little before we revisit.
The dismaying thing about the whole mess is that it will further divide the country (if that is even possible). All the division is moving the Democrats leftward and their candidates are publicly airing out issues and ideas that need to be talked about. With so much societal change across the globe right now I think that is a good thing.
Impeachment turbulence this week totally drowned out controversial proposals by leading Democrat contenders Elizabeth Warren and Bernie Sanders to address the growing wage gap in America.
The growing gap is real and should be of concern to all of us. What can or even should be done about it needs to be debated.
The AP reported last week that the gap between the haves and have-nots in the United States grew last year to its highest level in more than 50 years. Heartland states like Ohio were among the leaders of the increase, although several wealthy coastal states are still the worst.
The entire world is struggling to adjust to rapid technological change such as artificial intelligence. A wealth gap is growing exponentially. America and the world is dividing into haves and have-nots, which is causing political upheaval across the globe.
Improved technologies are producing immense wealth, but much is being concentrated in the hands of a relative few big winners against a larger number of losers.
More and more, liberal thinkers and politicians are proposing wealth taxes to even out the gap.
A wealth tax is different than income tax. The problem with income taxes is that the rich generally get around paying them with deductions, so, increasingly, the working class is paying a lot of them. So, it is not surprising that a socialist candidate like Bernie Sanders would propose a wealth tax, which he did last week.
Sanders announced both a wealth tax and an “income equality tax.” He proposes that a one percent wealth tax would be levied annually on net worth above $32 million. This percentage would start at one percent but increase all the way up to eight percent for net worth above $10 billion. In an interview with the The New York Times, Sanders said, “I don’t think that billionaires should exist.”
Such an idea will gain Sanders traction in the battle for liberal votes with his progressive rival Elizabeth Warren. Her wealth tax plan would apply to fortunes above $50 million, which she would hit with a 2 percent annual tax rate. She would add another 1 percent surcharge on all wealth in excess of $1 billion.
Economists differ on how much money would actually be raised by such plans. Many believe that such a tax would be very hard to administer and not actually collect as much revenue as Warren and Sanders claim. Warrens estimates that about 75,000 families would pay an additional $2.75 trillion over a 10-year period.
Such wealth taxes would necessitate computing a fair market value of all assets of the wealthiest every year. As you can imagine, that is where it begins to get sticky. Estimating the market value of private businesses could get very contentious and sap the working capital of many growing enterprises. That would be a primary argument of conservatives and capitalists. Many legal scholars believe such ideas to be unconstitutional.
Capitalists will argue that paying taxes should not be a a punishment for hard work and that the tax code should not be used to penalize any group of citizens. Even the very rich.
Keep in mind that both Sanders and Warren’s wealth taxies would be levied on top of also raising income taxes. Sanders would also levy a “wealth inequality tax” on corporations with more than $100 million in yearly revenue. It would punish all those corporations where the top employee earns more than 500 times more than the median employee. This “luxury” tax would start at an additional 5 percent and increase by how large the multiple actually is to discourage high executive pay.
I can see all kinds of complications with such taxes but I applaud both Warren and Sanders for being upfront about them. As the wealth gap grows more, such ideas will be advanced. It would be better to discuss them during the election rather than after.
In a future column, I would like to look at other proposals such as presidential contender Andrew Yang’s “universal guaranteed income.” Hopefully such debates will not all get drowned out by arguing who is more corrupt, Trump or Biden!
Our Post weekly online reader poll asks, “Should wealth taxes be levied to narrow income inequality?”