The staggering economic impact of a tax plan proposed by Democratic presidential candidate Sen. Elizabeth Warren of Massachusetts is now being exposed.
The Wall Street Journal did the math and found that the federal tax rates of some Americans could be over 100 percent under Warren’s plan.
That finding was part of a drumbeat of warnings about the effects of Warren’s proposals.
“The wealth tax shrinks the economy because saving is more expensive,” said Richard Prisinzano, Penn Wharton director of policy analysis. “The results also suggest that the negative effect of the tax increases as the tax rate increases.”
CNBC quoted one tax expert who said Warren’s proposals will push wealthy Americans to invest and live outside the United States.
Warren’s wealth tax is “going to induce a big capital flight out of this country,” said economist Edward Wolff. “Who is going to sit around and see their wealth earning nothing or even in negative territory?”
“These people are going to move their money to other countries,” he said.
Wolff’s comments came even before The Journal analyzed Warren’s proposed tax rates and offered a hypothetical example of what could happen as the multiple proposals increase taxes.
“Potential tax rates over 100% could result from the combination of tax increases the Massachusetts senator proposes for the very top tier of investors. She wants to return the top income-tax rate to 39.6% from 37%, impose a new 14.8% tax for Social Security, add an annual tax of up to 6% on accumulated wealth and require rich investors to pay capital-gains taxes at the same rates as other income even if they don’t sell their assets,” The Journal reported.
“Consider a billionaire with a $1,000 investment who earns a 6% return, or $60, received as a capital gain, dividend or interest. If all of Ms. Warren’s taxes are implemented, he could owe 58.2% of that, or $35 in federal tax. Plus, his entire investment would incur a 6% wealth tax, i.e., at least $60. The result: taxes as high as $95 on income of $60 for a combined tax rate of 158%.”
“It’s just a continuing laundry list of proposals that just keep heaping on,” said Robert Gordon of Twenty-First Securities Corp.
But for progressives, these issues are in the realm of details.
“It is in campaign mode, and there are a lot of questions still to be resolved,” said Greg Leiserson, director of tax policy at the Washington Center for Equitable Growth. “They are resolvable.”
Art Laffer, a former economic adviser to President Ronald Reagan, disagrees.
“We will go into the deepest decline ever if her full program were implemented,” Laffer said on Fox News Channel’s “America’s Newsroom.”
Laffer said Warren’s policies stir fears that the economy could replicate what happened in 1930s after massive increases in income taxes and estate taxes fueled the “biggest, deepest decline in U.S. history.”
“I am really very afraid that all of that will occur again as a consequence of [her] policies,” Laffer said.
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