Elizabeth Warren is proposing a wealth tax on ‘ultra-millionaires’

The Massachusetts senator's plan is the latest Democratic push to raises taxes on the rich.

Sen. Elizabeth Warren, who is running for the 2020 Democratic presidential nomination, speaks at a rally Wednesday at Columbia College in in Columbia, South Carolina. Travis Dove / The New York Times

WASHINGTON — Sen. Elizabeth Warren of Massachusetts, a Democratic candidate for president, is expected to unveil a plan that would impose a new annual tax on the 75,000 wealthiest families in the United States.

Her plan is the latest sign of how Democrats, with an eye toward 2020, are looking to tax the rich to pay for expanded social programs and distribute wealth more evenly. In recent weeks, other Democrats have called for increasing marginal income tax rates for the very rich, including freshman Rep. Alexandria Ocasio-Cortez, D-N.Y., who has proposed a 70 percent top rate on income exceeding $10 million a year.

Warren’s so-called ultramillionaire tax would levy a 2 percent annual tax on all assets — including stocks, real estate and retirement funds, held either in the United States or abroad — owned by households with a net worth of $50 million or more. It would add an additional 1 percent “billionaire surtax” on households with net worth exceeding $1 billion, a group that includes President Donald Trump.


No assets would be exempt. The plan also calls for increased spending at the IRS to ensure that Americans are not evading the tax. And it would impose an “exit tax” on those seeking to avoid the wealth tax by renouncing their American citizenship.

The proposal would raise $2.75 trillion in tax revenue over a decade, according to calculations by Emmanuel Saez and Gabriel Zucman, two University of California-Berkeley economists whose work documents the growing concentration of wealth in the United States. Warren and her team consulted with Saez and Zucman in drafting the proposal, which seeks to establish a new measure of “progressivity” in taxation, based on what Americans own, not just what they earn.

“It’s time to fundamentally transform our tax code so that we tax the wealth of the ultrarich, not just their income,” Warren said Thursday. “By asking our top 75,000 households to pay their fair share, my proposal will help address runaway wealth concentration and at the same time accelerate badly needed investments in rebuilding our middle class.”

Warren cited the economists’ finding that the richest 0.1 percent of Americans pay a lower percentage of their taxes, as a share of net worth, than the bottom 99 percent.


“We tax the very wealthiest less than everyone else because we tax income from capital and inheritances at much lower rates than income from good, old-fashioned hard work,” said Lily Batchelder, a New York University tax professor and former deputy director of the National Economic Council under President Barack Obama.

Democrats have long focused on income inequality and the rising concentration of wealth, but they have grown more vocal about the issue after the passage of Trump’s tax cuts, which delivered the bulk of their benefits to the highest-earning Americans.

Saez and Zucman’s work shows that the wealthiest 0.1 percent of families — roughly the group that would be hit by Warren’s proposed tax — hold 20 percent of all wealth in the United States. Their share of the nation’s wealth has doubled since 1985. In a recent sign of billionaire prosperity, hedge-fund manager Kenneth Griffin paid $238 million for a Central Park apartment this week, more than doubling the previous record for a home purchase in the United States.

The bottom 90 percent of Americans by net worth hold 25 percent of all wealth, combined, according to Saez and Zucman’s work. That is down from nearly 40 percent of all wealth in 1985.

While the idea of taxing wealthy Americans is resurgent, it is not unique: The top marginal income tax rate in the United States was as high as 91 percent in the early 1960s. Today, the top marginal income tax rate is 37 percent, down from 39.6 percent during Obama’s second term.


Warren appears to be the first declared Democratic candidate to release a plan for a wealth tax, but the idea is quickly gaining steam among liberal activists and policy experts. Two left-leaning think tanks, the Institute on Taxation and Economic Policy and the Washington Center for Equitable Growth, released wealth-tax-themed policy briefs this week in Washington.

In a sign of the idea’s rising currency with the Democratic establishment, Batchelder and another former economic adviser to Obama both praised the plan Thursday. “The incidence of extreme wealth inequality — as well as the magnitude of never-taxed wealth — is just so obscene at this point in our nation that I think there is simply no choice but to explore a wealth tax like this,” said Gene Sperling, who directed Obama’s National Economic Council.

The projected revenue from Warren’s proposal would be enough to pay for several policy initiatives that she and other Democrats have proposed, including universal prekindergarten, a $1 trillion federal infrastructure spending push and widespread debt relief for student loans. But increasingly, liberal activists see taxing the incomes and the wealth of the rich as a policy goal in and of itself — to combat what they see as dangerous levels of inequality.

“Democracies become oligarchies when wealth is too concentrated,” Saez said in praising the plan. “A progressive wealth tax is the most direct policy tool to curb the growing concentration of wealth in the United States.”

Several European nations tax wealth, including Switzerland and Norway. The only current rate higher than the rate Warren is proposing is in Spain.


Conservative groups, business leaders and some other high-earning Americans have criticized Democrats’ calls for increased taxes on high incomes, saying they would dampen economic growth. Some of those same groups were quick to criticize Warren’s wealth-tax proposal Thursday.

Kyle Pomerleau, an economist at the Tax Foundation, a Washington think tank that often promotes the economic benefits of tax cuts, said that a wealth tax would prove difficult to assess and enforce, and that it would disproportionately hit investments with normal returns, which are more sensitive to taxation — as opposed to returns that are outsize largely because of luck.

“I think it is a poorly targeted tax on capital,” he said.