Peter Morici Blog | The Folly of Elizabeth Warren's Wealth Tax | Talkmarkets
Professor Emeritus, Robert H. Smith School of Business, University of Maryland

Professor Peter Morici is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in ... more

The Folly of Elizabeth Warren's Wealth Tax

Date: Monday, March 11, 2019 10:14 AM EDT

Most Fortunes Are Earned by Entrepreneurs Cashing in on Their Great Idea, Not the Idle Rich of Democrats' Fantasies.

The Democratic presidential candidates appear driven by tales of the rich exploiting the downtrodden and support higher taxes to redress injustice - Sens. Elizabeth Warren and Bernie Sanders want a federal wealth tax and higher levies on estates.

Warren is most intriguing, because she tries to make the case for a wealth tax more in terms of correcting adverse forces within the capitalist system than as a means to finance, for example, Medicare for all or a Green New Deal.

She proposes a 2% annual tax on households with assets exceeding $50 million and 3% on those exceeding $1 billion, and cites economists Emanuel Saez and Gabriel Zucman to bolster her case for "capitalism with rules."

Saez is the occasional research partner of Thomas Piketty who created a stir in 2014 with his book "Capital in the Twenty-First Century," which allegedly documented the trend for wealth and income to become increasingly concentrated in market economies.

Chris Giles of the Financial Times and others found numerous errors in the statistics and basic computations. Martin Feldstein effectively argued that death, estate taxes and division of wealth among multiple heirs-not to mention the penchant of scions like Andrew Carnegie to endow charitable foundations-tend to dissipate family wealth.

Wealth always begins with savings and better ideas. Entrepreneurs raise capital-that is how we got Sears, Macy's and Amazon and IBM, Microsoft and Google in the first place. Eventually, though, most businesses fall from the control of founding families and patriarchs become portraits on board-room walls.

If wealth did not consistently dissipate, income would be increasingly concentrated, as Saez and Piketty allege, among a coupon clipping, unproductive aristocracy. However, recent efforts to document concentration focus on financial and real property assets and income flows and gloss over the contributions to income of human capital.

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Dick Kaplan 1 year ago Member's comment

While I'm not sure that I agree with everything you wrote, this is a well written, very thought provoking piece. I enjoyed it immensely. Thank you.

Susan Miller 1 year ago Member's comment

Yes, the author makes a very convincing argument.