Warren’s plan to tax both wealth and returns on wealth is “unrealistic.” TPC’s Howard Gleckman concludes that Democratic presidential hopeful Elizabeth Warren’s proposals for new taxes on high-income households are not likely to work as she hopes. Together, the very wealthiest could end up paying a marginal effective tax rate of more than 100 percent on their investments, He explains why they’d respond with less investment or tax avoidance.
The wealth tax may be unconstitutional. In a New York Times op-ed, law professors Daniel Hemel and Rebecca Kysar, who support higher taxes on the affluent, describe the problem with Warren’s and presidential hopeful Bernie Sanders’ shared idea for taxing wealth. The US Constitution requires that any “direct tax” be apportioned among states based on population. To match revenue to population, they estimate that “the wealth tax rate in West Virginia — the poorest state per capita — would need to be roughly 10 times the rate in more affluent California and more than 20 times the rate in prosperous Connecticut.”
And from Hill Democrats: A millionaires surtax. Rep. Don Beyer of Virginia and Sen. Chris Van Hollen of Maryland have proposed an alternative to the wealth tax. Their plan: a 10 percentage point personal income tax surtax on all income above $2 million for married couples and $1 million for single filers. TPC estimates that the surtax would raise nearly $635 billion over ten years.
The US and China agree to roll back some tariffs. A spokesman for China’s Commerce Ministry said at his weekly news conference that the two nations have “agreed to cancel the tariffs by stages in accordance with the development of the agreement.” However, according to multiple reports, the “phase one” agreement to roll back a share of tariffs on each country’s products has not yet been finalized.
The Senate Budget Committee approves a plan to overhaul the budget and spending process. The bipartisan bill approved on a 15-6 vote would set two year budget targets but continue annual appropriations bills. The debt limit would automatically rise with the budget.. The bill also would require automatic spending reductions if deficits exceed budgeted amounts. Several Democrats argued this could lead to cuts in mandatory programs such as Social Security and Medicare.
Greece considers a flat tax to woo wealthy foreign investors. Individuals who shift their residence to Greece would pay a flat tax of €100,000 if they make a minimum investment in the country of €500,000 over three years. The non-domicile program is part of a larger reform plan that would lower tax rates for businesses and households and levy a 15 percent tax on stock options. Prime Minister Kyriakos Mitsotakis’s administration wants to boost the nation’s economic growth rate to 2.8 percent next year. Creditors call that optimistic.
United Kingdom’s finance minister promises tax cuts. Sajid Javid says the government’s new fiscal plan leaves room for tax cuts. Perhaps not coincidently, the UK will hold a snap election in five weeks.
Next week: “Taxing Capital Income: Mark-to-Market and Other Approaches. Increasing taxes on capital income—highly skewed toward the wealthy—offers alternative ways to address inequality through the tax system. But design and implementation are not easy. On Friday, November 15, join TPC for a keynote address by Rep. Jan Schakowsky (D-IL) and two panels that will tackle the issue. Register here to attend or watch its live webcast here.
For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky at firstname.lastname@example.org.