Why Elizabeth Warren’s Wealth Tax Would Work

Why Elizabeth Warren’s Wealth Tax Would Work

In 1995, Edward Wolff, an economist at N.Y.U., published a short book called “Top Heavy,” which detailed the increasingly alarming concentration of wealth in the United States, and warned of the threat that it posed to American democracy, as the ultra-rich sought to exercise more political power. At the time, the richest one per cent of families controlled about forty per cent of all household wealth—defined as stocks, bonds, other financial assets, equity in private businesses, trusts, real estate, and bank deposits—while much of the population had virtually no wealth at all once debts and mortgages were taken into account. To address this disparity, Wolff called for the introduction of an annual tax on wealth. Aware that this might be considered a radical idea, he kept his proposed tax rates at pretty low levels. Under his plan, households with a net worth of a hundred thousand dollars would pay five cents in tax on every hundred dollars of their wealth; the rate would rise to thirty cents per hundred dollars for households worth a million dollars or more. (Back then, about three per cent of U.S. households fell into the latter bracket.)

 

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