by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Wealth taxes of the sort proposed by Sen. Elizabeth Warren (D., Mass.) will have little impact on economic inequality, one of the pioneers of wealth taxation wrote in a recent paper.
Edward Wolff, an economist at New York University whose 1995 book Top Heavy was one of the first to float the idea of a tax on wealth, argued in a recent paper that Warren’s wealth tax would have a “minuscule” effect on wealth inequality. Using data from the Survey of Consumer Finances, Wolff examined the effects of both Warren’s tax and a Swiss-style wealth tax, finding that both would have minimal impact on America’s Gini coefficient, a standard economic measure of inequality.
“How do the Swiss and Warren wealth tax affect overall wealth inequality? On the basis of the Gini coefficient, there would be virtually no impact from either tax,” Wolff wrote. “If one objective of a wealth tax is to substantially reduce wealth inequality, neither of these taxes will achieve that objective.”
This finding, in particular from Wolff, challenges the efficacy of a tax which campaigns like Warren’s and Sen. Bernie Sanders’s (I., Vt.) have framed as a way to close the yawning gap between rich and poor. Although Wolff remains sympathetic to wealth taxation, his findings further illustrate why many European countries have abandoned wealth taxes in favor of other schemes.