by Mitch Kokai
Senior Political Analyst, John Locke Foundation
The plan, released … as the Massachusetts senator launched her bid for the Democratic Party’s 2020 presidential nomination, would impose a 2 percent annual tax on assets for households worth more than $50 million, plus a 1 percent surtax on households with a net worth of $1 billion or more.
Warren says the tax would affect only the “tippy top 0.1%,” or about 75,000 households. She has framed the proposal as a way to make them “pay their fair share,” to reduce wealth concentration, and to “accelerate badly needed investments in rebuilding our middle class.” …
… So it’s being advertised as a revenue raiser that boosts the government’s capacity to fund programs for the middle class. But the real-world experience of nations that have imposed wealth taxes suggests that this is a bit optimistic. …
… More likely, the rich would find ways to avoid those assessments entirely. Sweden’s wealth tax, for example, was frequently blamed for capital flight and a depressed rate of national entrepreneurship. Relative to other European nations, Swedes were less likely to own their own business, and those who did often took their money elsewhere rather than reinvest it at home. The founder of Ikea, for example, moved much of his wealth into offshore foundations that shielded the money from the tax.
I say it was blamed because a little more than a decade ago, Sweden eliminated its wealth tax. The move was easy to make, because the government lost essentially no revenue. As The Financial Times reported, the elimination of the tax had “virtually no effect of government finances.” So much for making the rich pay their share.
Nor is Sweden an outlier in its decision to nix a tax on wealth. European countries that have imposed wealth taxes have largely given up on them; of the dozen OECD nations that had wealth taxes in 1990, just four still have the tax on the books. Warren wants the U.S. to adopt an idea that has been tried and discarded.