Jon Hartley explains at National Review Online why U.S. Sen. Elizabeth Warren takes the wrong approach to taxes.
This week, Senator Elizabeth Warren’s 2020 presidential campaign unveiled a radical proposal to levy a minimum 7 percent corporate tax on U.S. companies making more than $100 million annually, with the goal of raising around $1 trillion in new revenue. This comes on the heels of Warren’s proposal to institute a new 2 percent wealth tax on all individual fortunes above $50 million and an additional 1 percent tax on all fortunes above $1 billion with the objective of reducing wealth inequality.
Unfortunately, the higher corporate taxes and wealth taxes Senator Warren advocates are among the most inefficient ways of raising tax revenue without harming the economy.
Corporate taxes have been shown to be significantly less efficient in raising tax revenue than individual income taxes or sales taxes. The ease with which corporations can establish offshore subsidiaries to avoid taxes or engage in tax inversions significantly contributed to the corporate-tax-revenue and capital-investment shortfalls seen in America in recent years. Indeed, many European countries had already recognized the inefficiency of corporate taxation and reduced their corporate-tax rates well before the U.S. did so as part of the Tax Cuts and Jobs Act of 2017. …
… As for the new wealth taxes Warren proposes, the example of Europe is instructive there, too. Only three European countries (Norway, Spain, and Switzerland) still impose annual wealth taxes today, down from twelve in 1990. The change was fueled by a growing recognition that wealth taxes very often lead to capital flight as wealthy individuals re-domicile to lower-tax jurisdictions, taking their income-tax dollars with them. France’s now-abandoned wealth tax, for example, is estimated to have contributed to the departure of some 42,000 millionaires from the country between 2000 and 2012.
