Larry Summers scoffed at the wealth tax being proposed by 2020 Democrats such as Elizabeth Warren and Bernie Sanders.
Sanders and Warren have proposed wealth taxes to pay for some of their big-budget proposals like “Medicare for all” and student loan forgiveness. A wealth tax differs from an income tax in that it requires payment on the net worth of an individual. That means a billionaire could be taxed more than they earned in a given year if a percentage of their net worth is greater than their annual income.
In a speech before the Peterson Institute for International Economics, Summers, who served as Treasury secretary under President Clinton, claimed a wealth tax would likely be ruled unconstitutional and had “little chance” of passing through Congress.
He claimed a wealth tax is not “terribly well designed.” Summers said other tax collection opportunities would be more efficient than a wealth tax on billionaires, adding “there are better ways” to be progressive.
He estimated that Emmanuel Saez and Gabriel Zucman, the two economists who calculated the wealth tax revenue for both Warren and Sanders, overestimated the potential cash flow by half because it “vastly underestimates” the total wealth of billionaires and their ability to skate around such a tax.
“I think for progressives to invest their energy in a proposal that the Supreme Court has better than a 50 percent chance of declaring unconstitutional, that has very little chance of passing through the Congress, whose revenue potential is extraordinarily in doubt — for that to be the defining element in the progressive agenda in the United States, it seems to me is to potentially sacrifice an immense opportunity,” Summers said.
As Summers noted, some question whether wealth taxes are allowed under the 16th Amendment, which allowed income taxes to be collected by the federal government.
Warren has faced pressure from her 2020 opponents who have claimed her wealth tax would not fully pay for her “Medicare for all” proposal, meaning taxes could rise for the middle class. She announced that she will deliver “exact details” on her plan for “Medicare for all” in the coming weeks.
