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Sen. Elizabeth Warren made another pitch for her “2 cents” wealth tax plan during the fifth Democratic debate in Atlanta on Wednesday night, this time with the added bonus that it would help “build an America that works for the people, not just rich folks.”
Ms. Warren went so far as to claim the tax is “not about punishing anyone.” But what else is today’s left for other than the redress of perceived grievances? Ms. Warren’s punitive tax proposal would do little to unify Americans, rather it would cause lasting damage to tax-paying middle-class Americans — the very people she claims to protect.
The fundamental issues with her “plans for everything” call to mind an old kindergarten story that deals with killing the goose that lays the golden egg. A basic and timeless fable if there ever was one, but it’s a fundamental lesson — destroying the means of production for immediate satisfaction will inevitably come back to hurt you down the line — seems to be lost on Ms. Warren.
Ms. Warren claims her 2 cents plan will help raise $2.75 trillion over 10 years, and her version of Medicare for All (read: the elimination of private health insurance) provide excellent examples of killing the goose that lays the golden egg. In this case, the goose is the American taxpayer and the egg is prosperity and a high standard of living. Like many politicians, Ms. Warren is promising the “golden egg” by way of expansive programs in return for votes, but at the expense of the “goose.”
Raising taxes on the wealthy to finance an expensive welfare state and single-payer health insurance, as well as “free” college and the many other “free” policy proposals that Ms. Warren has peddled on the campaign stump is not as easy as she makes it out to be. We need only look to Europe, where such plans have collapsed, to see examples.
There are different reasons why these European countries have abandoned the net-wealth tax. Such a scheme is administratively difficult to develop and implement. It also doesn’t bring in much revenue. The Organization for Economic Co-operation and Development (OECD) noted that “[r]evenues from wealth taxes have typically been very low.”
Although wealth has grown, revenues have “either remain[ed] stable or decline[d] over time.” Not only is it nearly impossible to fully account for an individual’s assets, but it’s also an insurmountable task to fairly tax them.
There’s also a problem with anticipated revenue. Ms. Warren’s own estimate of $2.75 trillion in revenue from her 2 cents plan has come into question by Lawrence Summers, an economic adviser to President Barack Obama, and Natasha Sarin, who estimated that the tax would raise “approximately 40 percent” of the projected revenue. If the anticipated revenues aren’t what Ms. Warren projects, which is likely to be the case, who pays for it? Will we just add more on America’s credit card and pass the burden onto future generations?
It’s no secret that the average European pays way more in taxes than the average American. We’re often told by leftist Democrats that their welfare state benefits offset the cost in taxes, but what Ms. Warren has proposed are additional taxes that likely won’t meet the projected revenues, and it will lead to a crippling tax burden felt not by the wealthy, but by the middle class.
The French Molinari Economic Institute explained that “the average ‘real tax rate” for typical workers in the European Union was … 44.5 percent” in 2019. This is an enormous tax burden, and it’s one that isn’t only derived from income taxes; it also comes through the value-added tax on consumption, social insurance taxes and other taxes that European governments require.
A taxpayer in France has to work until July 19 of this year to pay his tax bill, which is much longer than the June 12 average for the European Union. It doesn’t get much better in Germany, where a taxpayer has to work until July 5, or Sweden, where a taxpayer has to work until June 22. In the United States, Americans paid their tax bill on April 16.
Even with such heavy tax burdens, revenues could not keep pace with the costs of universal social programs. As a result, some European countries have experienced debt crises in the past and are likely to see similar, if not worse, crises in the future.
A common talking point among Republicans is that Democrats want to turn the United States into Europe. In the case of Ms. Warren’s vision for America, they’re right.
Ms. Warren has stated that her wealth tax will help fund child care and free college. But with the extremely low revenue projections from virtually everyone but her campaign consultants, there’s no way a Warren presidency could ensure funding for such programs. That’s even before we get to paying for her version of Medicare for All, which comes with a ballpark estimate $30 trillion price tag.
And what happens when Ms. Warren’s wealth tax plan fails to bring in the expected revenue? The same thing that always happens — the debt and deficit expand, and the federal government is inevitably forced to look elsewhere for revenue, namely the middle class. Ms. Warren can make endless claims that her tax plans would only target the wealthy, yet based on similar situations we’ve seen, it’s clear such tax increases would not bring in the expected revenue.
Ms. Warren’s plans really would turn the United States into Europe, but not the so-called good aspects upon which the left heaps praise. Elizabeth Warren’s America, like much of Europe, would be replete with a tax-burdened middle class, insolvent social programs, reduced investment and a debt crisis down the road to cap things off. Does that sound like a breeding ground for unity to you?
Ms. Warren’s pie-in-the-sky 2 percent net-wealth tax would surely kill the goose, and the American taxpayer would almost surely never see a golden egg.