Sen. Elizabeth Warren was not the first major American politician to put the idea of a big fortune on the political agenda.
It has actually been kicked around in some form since the end of the 1990s, when an influential then independent drafted a proposal which he hit as a way to reduce government debt while at the same time 99 percent of interests were preserved.
Here's how the plan's architect describes it: "In my calculations, 1 percent of Americans controlling 90 percent of wealth in this country will be affected by my plan. The other 99 percent of the population would get deep reductions in their federal income taxes. "
His name? Donald Trump.
Trump Abolition Plan
Trump's plan, articulated in the 1
One he wanted the tax to be a one-time tax that would reduce government debt and thus reduce interest payments. This reduction in payments would be the lasting winner of the middle class, while rich people would just pay the tax once and then forget about it. Warren's plan would simply charge a small tax every year.
Two, he wanted a rather high rate – 14.5 percent – it would have required a lot of quick liquidation of business assets. Warren rates structure is much lower than that.
Three, he set the threshold for his tax lower. While Warren wants to tax wealth for over $ 50 million, Trump suggests taxing wealth at $ 10 million. This was in 1999, and there has been some inflation since then, but even in inflation-adjusted dollars, the Trump tax cut is just under $ 15 million.
In addition, Warren has a progressive course structure: Assets between $ 50 million and $ 1 billion will be taxed at 2 percent, and assets over $ 1 billion are taxed at 3 percent tax. Trump's treasure is flat, but starts lower, so he kinda sugar richer more than super-duper rich. The plan did not really make much sense, but it underlines a reason why very wealthy people express great concern about government debt.
Trump's plan had some problems – and some insight
A major problem with wealth taxes historically has been that actual fundraising is relatively difficult – financial assets are highly portable and the wealthy people who own them have a strong incentive to find ways to avoid paying.
Warren's proposal contains a few ideas to try to limit avoidance – including the simple but important step in increasing IRS funding – of course, there are no guarantees.
Trump's one-time treasure would suffer from all the same challenges as Warren's, except that by setting the price much higher while becoming a one-time tax, he created huge prevention incentives and never came up with a plan for to handle them.
Perhaps more importantly, the whole concept of dedicating a massive effort to reduce the federal debt overhang is somewhat questionable. Trump's idea was that the disbursement of the government debt would reduce federal interest costs, allowing for a middle-class tax credit. Instead, debt volumes have risen dramatically since 1999, but federal debt payments as a percentage of GDP are actually lower than they have since then, as interest rates have fallen dramatically.
Relatively little of this debt statement was shaped by middle class tax cuts – Bush's regressive tax cuts, a few wars, a major recession, and a new round of regressive Trump tax cuts were the biggest player – but if we had wanted to introduce a large mid-range tax relief In 1999, we could just have done it, rather than fussing around with exotic treasures.
But Trump's thinking here raises an important point. If the country is still unclear about the deficit, there is at least a chance that debt service costs will occur unexpectedly later. And if that happens, some kind of quick soak-the-rich tax scheme would be an attractive way to reduce those costs. So, if you happen to be a very wealthy person, it is very sensible to worry about long-term debt accumulation (because if it goes bad, you will probably be stuck with the bill) and prefer instead to slowly but surely reduce the deficit by cutting pension programs. .
The issue is rarely discussed in these respects, but Trump essentially flows what would be a reasonable approach to dealing with a debt crisis. And very rich people tend to want to avoid this result.