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Archive for the ‘Elizabeth Warren’ Category

With their punitive proposals for wealth taxes, Bernie Sanders and Elizabeth Warren are leading the who-can-be-craziest debate in the Democratic Party.

But what would happen if either “Crazy Bernie” or “Looney Liz” actually had the opportunity to impose such levies?

At the risk of gross understatement, the effect won’t be pretty.

Based on what’s happened elsewhere in Europe, the Wall Street Journal opined that America’s economy would suffer.

Bernie Sanders often points to Europe as his economic model, but there’s one lesson from the Continent that he and Elizabeth Warren want to ignore. Europe has tried and mostly rejected the wealth taxes that the two presidential candidates are now promising for America. …Sweden…had a wealth tax for most of the 20th century, though its revenue never accounted for more than 0.4% of gross domestic product in the postwar era. …The relatively small Swedish tax still was enough of a burden to drive out some of the country’s brightest citizens. …In 2007 the government repealed its 1.5% tax on personal wealth over $200,000. …Germany…imposed levies of 0.5% and 0.7% on personal and corporate wealth in 1978. The rate rose to 1% in 1995, but the Federal Constitutional Court struck down the wealth tax that year, and it was effectively abolished by 1997. …The German left occasionally proposes resurrecting the old system, and in 2018 the Ifo Institute for Economic Research analyzed how that would affect the German economy. The authors’ baseline scenario suggests that long-run GDP would be 5% lower with a wealth tax, while employment would shrink 2%. …The best argument against a wealth tax is moral. It is a confiscatory tax on the assets from work, thrift and investment that have already been taxed at least once as individual or corporate income, and perhaps again as a capital gain or death tax. The European experience shows that it also fails in practice.

Karl Smith’s Bloomberg column warns that wealth taxes would undermine the entrepreneurial capitalism that has made the United States so successful.

…a wealth tax…would allow the federal government to undermine a central animating idea of American capitalism. …The U.S. probably could design a wealth tax that works. …If a country was harboring runaway billionaires, the U.S. could effectively lock it out of the international financial system. That would make it practically impossible for high-net-worth people to have control over their wealth, even if it they could keep the U.S. government from collecting it. The necessity of this type of harsh enforcement points to a much larger flaw in the wealth tax… Billionaires…accumulate wealth…it allows them to control the destiny of the enterprises they founded. A wealth tax stands in the way of this by requiring billionaires to sell off stakes in their companies to pay the tax. …One of the things that makes capitalism work is the way it makes economic resources available to those who have demonstrated an ability to deploy them effectively. It’s the upside of billionaires. …A wealth tax designed to democratize control over companies would strike directly at this strength. …a wealth tax would penalize the founders with the most dedication to their businesses. Entrepreneurs would be less likely to start businesses, in Silicon Valley or elsewhere, if they think their success will result in the loss of their ability to guide their company.

The bottom line, given the importance of “super entrepreneurs” to a nation’s economy, is that wealth taxes would do considerable long-run damage.

Andy Kessler, in a column for the Wall Street Journal, explains that wealth taxes directly harm growth by penalizing income that is saved and invested.

Even setting comical revenue projections aside, the wealth-tax idea doesn’t stand up to scrutiny. Never mind that it’s likely unconstitutional. Or that a wealth tax is triple taxation… The most preposterous part of the wealth-tax plans is their supporters’ insistence that they would be good for the economy. …a wealth tax would suck money away from productive investments. …liberals in favor of taxation always trot out the tired trope that the poor drive growth by spending their money while the rich hoard it, tossing gold coins in the air in their basement vaults. …So just tax the rich and government spending will create great jobs for the poor and middle class. This couldn’t be more wrong. As anyone with $1 billion—or $1,000—knows, people don’t stuff their mattresses with Benjamins. They invest them. …most likely…in stocks or invested directly in job-creating companies… A wealth tax takes money out of the hands of some of the most productive members of society and directs it toward the least productive uses. …existing taxes on interest, dividends and capital gains discourage the healthy savings that create jobs in the economy. These are effectively taxes on wealth—and we don’t need another one.

Professor Noah Smith leans to the left. But that doesn’t stop him, in a column for Bloomberg, from looking at what happened in France and then warning that wealth taxes have some big downsides.

Studies on the effects of taxation when rates are moderate might not be a good guide to what happens when rates are very high. Economic theories tend to make a host of simplifying assumptions that might break down under a very high-tax regime. …One way to predict the possible effects of the taxes is to look at a country that tried something similar: France, where Piketty, Saez and Zucman all hail from. …France…shows that inequality, at least to some degree, is a choice. Taxes and spending really can make a big difference. But there’s probably a limit to how much even France can do in this regard. The country has experimented with…wealth taxes…with disappointing results. France had a wealth tax from 1982 to 1986 and again from 1988 to 2017. …The wealth tax might have generated social solidarity, but as a practical matter it was a disappointment. The revenue it raised was rather paltry; only a few billion euros at its peak, or about 1% of France’s total revenue from all taxes. At least 10,000 wealthy people left the country to avoid paying the tax; most moved to neighboring Belgium… France lost not only their wealth tax revenue but their income taxes and other taxes as well. French economist Eric Pichet estimates that this ended up costing the French government almost twice as much revenue as the total yielded by the wealth tax.

In other words, the much-maligned Laffer Curve is very real. When looking at total tax collections from the rich, the wealth tax resulted in less money for France’s greedy politicians.

And this chart from the column shows that French lawmakers are experts at extracting money from the private sector.

The dirty little secret, of course, is that lower-income and middle-class taxpayers are the ones being mistreated.

By the way, Professor Smith’s column also notes that President Hollande’s 75 percent tax rate on the rich also backfired.

Let’s close with a report from the Wall Street Journal about one of the grim implications of Senator Warren’s proposed tax.

Elizabeth Warren has unveiled sweeping tax proposals that would push federal tax rates on some billionaires and multimillionaires above 100%. That prospect raises questions for taxpayers and the broader economy… How might that change their behavior? And would investment and economic growth suffer? …The rate would vary according to the investor’s circumstances, any state taxes, the profitability of his investments and as-yet-unspecified policy details, but tax rates of over 100% on investment income would be typical, especially for billionaires. …After Ms. Warren’s one-two punch, some billionaires who generate pretax returns could pay annual taxes that would leave them with less money than they started with.

Here’s a chart from the story (which I’ve modified in red for emphasis) showing that investors would face effective tax rates of more than 100 percent unless they somehow managed to earn very high returns.

For what it’s worth, I’ve been making this same point for many years, starting in 2012.

Nonetheless, I’m glad to see it’s finally getting traction. Hopefully this will deter lawmakers from ever imposing such a catastrophically bad policy.

Remember, a tax that discourages saving and investment is a tax that results in lower wages for workers.

P.S. Switzerland has the world’s best-functioning wealth tax (basically as an alternative to other forms of double taxation), but even that levy is destructive and should be abolished.

P.P.S. Sadly, because their chief motive is envy, I don’t think my left-leaning friends can be convinced by data about economic damage.

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Last month, I accused Elizabeth Warren of being a “fiscal fraud” for proposing a multi-trillion dollar government takeover of healthcare.

She then unveiled a plethora of class-warfare taxes. As I discussed yesterday on CNBC, she even wants to tax capital gains even if the gains are only on paper.

By the way, I’m disappointed that I forgot to mention in my final soundbite that school choice would be a very specific and very effective way of helping poor people climb the ladder of opportunity.

But let’s set that aside and focus on Senator Warren’s radical proposal.

Because the idea would be such a nightmare of complexity, I joked in the interview that the Senator must own shares in firms that do tax accounting.

That’s not a novel observation on my part. Earlier this year, the Wall Street Journal opined why this was a bad idea. Not just a bad idea, a ridiculously foolish idea.

Under current law, long-term capital gains are taxed at rates up to 20%—plus a 3.8% ObamaCare surcharge on investment income—only after the asset is sold. Mr. Wyden calls this a loophole. …Mr. Wyden…proposes an annual “mark to market” scheme… As an asset rises in value, its owners would pay tax each year on the incremental gain. This would create an enormous new accounting burden. Mr. Wyden may say that his mark-to-market rule will apply only to the top 1% or 0.1%, but it would still be a bonanza for tax attorneys. How will people in the top 2% know whether they’ve passed the threshold, and how far will they go to avoid it? …Mr. Wyden’s plan would tax gains that exist merely on paper. …And what about illiquid investments, such as private companies or real estate? As with Ms. Warren’s suggested wealth tax, no one knows how Mr. Wyden would go about valuing them. …Would the owner of an apartment building be asked to revalue it every year? Will an art investor be told to mark that Picasso to market? Good luck.

I’ve already written about Senator Wyden’s proposal.

It’s not just absurdly complex. It’s also bad tax policy, as the WSJ noted.

…there are good reasons to tax capital gains at preferential rates, which is why the U.S. has done it for decades under Democrats and Republicans. The lower rate…reduces the harm from double taxation after corporations already pay income taxes. …A lower tax rate is also a matter of fairness. If investors have capital losses, they aren’t allowed to deduct more than $3,000 a year. There’s no inflation adjustment either: If $100 of stock bought in 1999 is sold for $150 today, the difference is taxed even though much of it is an illusory gain caused by dollar erosion.

The final sentence should be emphasized.

Under the Wyden – now Warren – plan, you can have illusory gains that only reflect inflation, and then you can get taxed on those illusory gains even if you don’t actually get them because you haven’t sold the asset.

David Bahnsen, writing for National Review, says the idea is simply nutty.

Senator Ron Wyden of Oregon is the top-ranking member of the Senate’s tax committee... And his recent policy proposal to tax unrealized capital gains is just as extreme, silly, impractical, dangerous, and inane as any of the aforementioned policy whiffs floating around in the leftist hemisphere. …The problems here are almost as severe as the problems with getting a wind-powered ride across the Pacific Ocean in the Green New Deal. First and foremost, the compliance costs would be the biggest boondoggle our nation’s financial system has ever seen. How in the world is illiquid real estate that has not sold supposed to be “valued” each and every year, let alone illiquid businesses, private debt, venture capital, and the wide array of capital assets that make up our nation’s economy but do not fit in the cozy box of “mutual funds”? …Another problem exists for this delusional plan: How do smaller investors pay the tax on an investment that has not yet returned the cash to them? …Underlying all of the mess of this silly proposal from Senator Wyden is the Democrats’ continued lack of understanding about what is most needed in our economy — business investment. The war on capital is a war on jobs, on productivity, on growth, and on wages. Taking bold actions to disincentivize productivity, investment, risk-taking, and capital formation is akin to discouraging diet and exercise for someone trying to lose weight.

Amen.

I’ve repeatedly tried to explain that it is economically self-destructive to impose high – and discriminatorytaxes on income that is saved and invested.

Which is why the right capital gains tax rate is zero.

In other words, instead of worsening the bias against capital, we should be copying nations such as Switzerland, Singapore, Luxembourg, and New Zealand by abolishing the capital gains tax.

For more on that, I recommend this video.

P.S. Don’t forget that Senator Warren also has misguided proposals on many other issues, such as Social Securitycorporate governancefederal spendingcorporate taxationWall Street, etc.

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I’ve always considered Senator Bernie Sanders to be the most clueless and misguided of all presidential candidates.

But I also think “Crazy Bernie” is actually sincere. He really believes in socialism.

Elizabeth Warren, by contrast, seems more calculating. Her positions (on issues such as Social Securitycorporate governancefederal spendingtaxationWall Street, etc).) are radical, but it’s an open question whether she’s a true believer in statism. It’s possible that she simply sees a left-wing agenda as the best route to winning the Democratic nomination.

Regardless of motive, though, her proposals are economic lunacy. So maybe it’s time to give her “Looney Liz” as a nickname.

Consider, for instance, her new Medicare-for-All scheme. She got hammered for promising trillions of dollars of new goodies without specifying how it would be financed, so she’s put forward a plan that ostensibly fits the square peg in a round hole.

But as Chuck Blahous of the Mercatus Center explains, her plan is a farce.

…presidential candidate Sen. Elizabeth Warren released her proposal to ostensibly pay for the costs of Medicare for All (M4A) without raising taxes on the middle class. As published, the plan would not actually finance the costs of M4A. …the Warren proposal understates M4A’s costs, as quantified by multiple credible studies, by about 34.2%. Another 11.2% of the cost would be met by cutting payments to health providers such as physicians and hospitals. Approximately 20% of the financing is sought by tapping sources that are unavailable for various reasons, for example because she has already committed that funding to other priorities, or because the savings from them was already assumed in the top-line cost estimate. The remaining 34.6% would be met by an array of new and previous tax proposals, most of it consisting of new taxes affecting everyone now carrying employer-provided health insurance, including the middle class.

Here’s a pie chart showing that Warren is relying on smoke and mirrors for more than 50 percent of the financing.

By the way, the supposedly real parts of her plan, such as the new taxes, are a very bad idea.

Brian Riedl of the Manhattan Institute unleashed a flurry of tweets exposing flaws in her proposal.

Since I’m a tax wonk, here’s the one that grabbed my attention.

Wow. Higher taxes on domestic business income, higher taxes on foreign-source business income, higher taxes on business investment, more double taxation of capital gains, a tax on financial transactions, and a very punitive wealth tax (which would be a huge indirect tax on all saving and investment).

If ever enacted, the United States presumably would drop to last place in the Tax Foundation’s competitiveness ranking.

And let’s not forget that Medicare-for-All would dramatically increase the burden of government spending. In one fell swoop, we’d become Greece.

Actually, that probably overstates the damage. Based on my Lassez-Faire Index, I’m guessing we’d be more akin to Spain or Belgium (in other words, falling from #6 in the rankings to the #35-#40 range according to Economic Freedom of the World).

P.S. Don’t forget that Medicare has a massive shortfall already.

P.P.S. Looney Liz’s plan is terrible fiscal policy, but keep in mind it’s also terrible health policy since it would exacerbate the third-party payer problem.

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In a recent interview, I was asked whether all the new spending schemes proposed by Democratic candidates would lead (as has been the case in Europe) to enormous tax increases on the middle class.

The answer is yes, of course.

But most of the candidates are not honest on this issues (with the partial exception of Crazy Bernie). They’re promising – literally – trillions of dollars in added handouts, but their proposed tax increases only cover a tiny fraction of the cost.

Elizabeth Warren may be the most extreme example of this phenomenon.

She’s embraced every possible tax on higher-income taxpayers, including a sure-to-backfire wealth tax. But all of those tax increases wouldn’t come close to financing her spending agenda – even if one makes the heroic assumption that there’s no adverse economic impact and negative revenue feedback.

The Wall Street Journal opined on her absurd approach.

Tuesday’s Democratic debate…most important news was Senator Elizabeth Warren’s determined refusal to say if her plans would require taxes to increase on the middle class. …South Bend mayor Pete Buttigieg…added, accurately, that “no plan has been laid out to explain how a multi-trillion-dollar hole in this Medicare for All plan that Senator Warren is putting forward is supposed to get filled in.” …Senator Klobuchar…said “at least Bernie’s being honest here and saying how he’s going to pay for this and that taxes are going to go up. And I’m sorry, Elizabeth, but you have not said that, and I think we owe it to the American people to tell them where we’re going to send the invoice.” …this illuminates a problem with Ms. Warren’s agenda and her political character. On Medicare for All, everyone agrees that the cost will be at least $32 trillion over 10 years. Ms. Warren could impose her wealth tax, her higher taxes on capital gains, her higher income taxes on the affluent, and she still wouldn’t come close to paying for Medicare for All. And that’s before her plans for new spending entitlements on child care, pre-K education, free college and so much more. The only way to pay for this is to raise taxes on the middle class, which is where the real money is. That’s how government health care is financed in Europe.

But it’s not just the pro-market crowd at the Wall Street Journal that is raising the issue.

Even writers at Vox find it difficult to rationalize Sen. Warren’s evasive math.

Bernie Sanders…acknowledged that…middle-class taxes would have to go up… It was a rare moment when someone running for the Democratic presidential nomination admitted that their spending ambitions would have to be paid for by taxes that touch not just the wealthiest Americans but taxpayers further down the bracket. …Trying to sell a big progessive agenda on the backs of the rich may be popular. But the admission that middle-class taxes may have to go up is an admission that there may not be enough rich people in America to pay for it all. …Warren…indicated last week that she supports…Medicare-for-All… Such a plan would overhaul the entirety of the US health care system with a single-payer system funded through general revenue and debt. Here the promise of a vast welfare state solely funded by new taxes on the rich runs aground.

It’s gotten to the point that some left-leaning economists are scrambling to help square Warren’s circle.

Here are some excerpts from a report in today’s Washington Post, including some of the horrifying tax increases that her advisers are contemplating.

Internal and external economic policy advisers are trying to help Sen. Elizabeth Warren (D-Mass.) design a way to finance a single-payer Medicare-for-all health-care system…her team faces a challenge in crafting a plan that would bring in large amounts of revenue while not scaring off voters with big middle-class tax increases. The proposal could cost more than $30 trillion over 10 years. Complicating matters, she has already committed all of the money she would raise from a new wealth tax, close to $3 trillion over 10 years, to several other ideas… Robert Pollin, a left-leaning economist at the University of Massachusetts at Amherst who has worked with the Warren and Sen. Bernie Sanders (I-Vt.) teams, …suggests…a $600 billion annual “gross receipts” tax on businesses, …a 3.75 percent sales tax on “nonnecessities” that exempts low-income households, to raise an additional $200 billion; and a 0.38 percent tax on wealth above $1 million, which he says would raise the remaining $200 billion. Robert C. Hockett, a Cornell University professor who has also advised Warren and Sanders, said he has urged Warren’s team to propose financing Medicare-for-all in part with a “public premium” that would function similarly to a tax. …Warren’s team has also received recommendations to adopt a “progressive consumption tax”… This plan would raise trillions of dollars.

Wow, a smorgasbord of French-style tax ideas.

Let’s close with a chart from Brian Riedl of the Manhattan Institute.

As you can see, even if you combine all of the class-warfare taxes, they don’t come close to paying the $30 trillion price tag of Medicare for All.

The only good news, so to speak, is that Sen. Warren is a politician. She’s first and foremost interested in winning office and probably isn’t totally serious about actually creating all sorts of new entitlement schemes (just like I don’t particularly believe Republicans who put forth election-year plans for tax reform).

But that’s hardly a comforting observation since there would be “public choice” pressures to adopt at least some bad policy if she got to the White House.

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Since Elizabeth Warren is now the supposed frontrunner for the Democrats, she merits closer inspection.

That includes serious analysis of her policy proposals. I’ve already done some of that (reviewing her statist views on Social Security, corporate governance, federal spending, taxation, Wall Street, etc).

And, since all politicians deserve mockery, it also includes humor.

Needless to say, most Warren satire revolves around her dodgy claim to Indian ancestry. I’ve already shared some examples, and we’re adding to that collection today.

We’ll start with a pointed observation about her support for gun control

By the way, check the end of this column for a more serious take on the topic.

Returning to today’s theme, Senator Warren appeared on daytime TV to get her DNA results.

Though, to be fair, her DNA test did discover a tiny trace of Indian ancestry.

Though not enough to beat Ivory.

And since I used to drive a Jeep Cherokee, I found this item particularly amusing.

Last but not least, here’s an item for conspiracy-minded folks who think Bill and Hillary Clinton have a habit of…well, let’s put it delicately…a habit of permanently removing political obstacles.

I’ll close with a serious point.

There’s nothing wrong with Warren thinking she had Indian ancestry. Plenty of people presumably have mistaken beliefs about their genetic wiring, especially in a melting-pot nation like the United States.

And I don’t even have a big problem with her fake stories about family persecution. I suspect all politicians embellish their resumes and try to make their life stories more appealing.

What’s offensive about Warren, however, is that she used fake claims of minority status for personal advantage, even if it meant taking jobs from real minorities (which is why her phoniness reminds me of Soul Man, a comedic flick from the 1980s).

P.S. Since I believe in the humor version of equal opportunity, we have some Bernie humor here, here, and here, some Biden humor here, here, and here, and some potshots at Trump here, here, and here.

P.P.S. And let’s not forget this mockery of Senator Warren from 2011.

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In addition to being a contest over expanding the burden of government spending, the Democratic primary also is a contest to see who wants the biggest tax increases.

Bernie Sanders and Elizabeth Warren have made class-warfare taxation an integral part of their campaigns, but even some of the supposedly reasonable Democrats are pushing big increases in tax rates.

James Pethokoukis of the American Enterprise Institute opines about the anti-growth effect of these proposed tax hikes, particularly with regard to entrepreneurship and successful new firms.

The Democratic presidential candidates have plenty of ideas about taxes. Wealth taxes. Wall Street taxes. Inequality taxes. And probably more to come. So lots of creative thinking about wealth redistribution. Wealth creation? Not so much. …one way to look at boosting GDP growth is thinking about specific policies to boost labor force and productivity growth. But there’s another way of approaching the issue: How many fast-growing growing new firms would need to be generated each year to lift the economy-wide growth rate each year by one percent? …a rough calculation by analyst Robert Litan figures there about 15 billion-dollar (in sales) companies formed every year. But what if the American entrepreneurial ecosystem were so vibrant that it produced 60 such companies annually? …The big point here is that the American private sector is key to growth. No other large economy is as proficient as the US in creating high-impact startups. But it doesn’t appear that the Democratic enthusiasm for big and bold tax plans is matched by concern about unwanted trade-offs.

If you want a substantive economic critique of class-warfare tax policy, Alan Reynolds has a must-read article on the topic.

He starts by explaining why it’s important to measure how sensitive taxpayers are (the “elasticity of taxable income”) to changes in tax rates.

Elasticity of taxable income estimates are simply a relatively new summary statistic used to illustrate observed behavioral responses to past variations in marginal tax rates. They do so by examining what happened to the amount of income reported on individual tax returns, in total and at different levels of income, before and after major tax changes. …For example, if a reduced marginal tax rate produces a substantial increase in the amount of taxable income reported to the IRS, the elasticity of taxable income is high. If not, the elasticity is low. ETI incorporates effects of tax avoidance as well as effects on incentives for productive activity such as work effort, research, new business start-ups, and investment in physical and human capital.

Alan then looks at some of the ETI estimates and what they imply for tax rates, though he notes that the revenue-maximizing rate is not the optimal rate.

Diamond and Saez claim that, if the relevant ETI is 0.25, then the revenue-maximizing top tax rate is 73 percent. Such estimates, however, do not refer to the top federal income tax rate, …but to the combined marginal rate on income, payrolls, and sales at the federal, state, and local level. …with empirically credible changes in parameters, the Diamond-Saez formula can more easily be used to show that top U.S. federal, state, and local tax rates are already too high rather than too low. By also incorporating dynamic effects — such as incentives to invest in human capital and new ideas — more recent models estimate that the long-term revenue-maximizing top tax rate is between 22 and 49 percent… Elasticity of taxable, or perhaps gross income…can be “a sufficient statistic to approximate the deadweight loss” from tax disincentives and distortions. Although recent studies define revenue-maximization as “optimal,” Goolsbee…rightly emphasizes, “The fact that efficiency costs rise with the square of the tax rate are likely to make the optimal rate well below the revenue-maximizing rate.”

These excerpts only scratch the surface.

Alan’s article extensively discusses how high-income taxpayers are especially sensitive to high tax rates, in part because they have considerable control over the timing, level, and composition of their income.

He also reviews the empirical evidence from major shifts in tax rates last century.

All told, his article is a devastating take-down of the left-of-center economists who have tried to justify extortionary tax rates. Simply stated, high tax rates hinder the economy, create deadweight loss, and don’t produce revenue windfalls.

That being said, I wonder whether his article will have any impact. As Kevin Williamson points out is a column for National Review, the left isn’t primarily motivated by a desire for more tax money.

Perhaps the strangest utterance of Barack Obama’s career in public office…was his 2008 claim that raising taxes on the wealthy is a moral imperative, even if the tax increase in question ended up reducing overall federal revenue. Which is to say, Obama argued that it did not matter whether a tax increase hurt the Treasury, so long as it also hurt, at least in theory and on paper, certain wealthy people. …ideally, you want a tax system with low transaction costs (meaning a low cost of compliance) and one that doesn’t distort a lot of economic activity. You want to get enough money to fund your government programs with as little disruption to life as possible. …Punitive taxes aren’t about the taxes — they’re about the punishment. That taxation should have been converted from a technical question into a moral crusade speaks to the basic failure of the progressive enterprise in the United States…the progressive demand for a Scandinavian welfare state at no cost to anybody they care about…ends up being a very difficult equation to balance, probably an impossible one. And when the numbers don’t work, there’s always cheap moralistic histrionics.

So what leads our friends on the left to pursue such misguided policies? What drives their support for punitive taxation?

Is is that they’re overflowing with compassion and concern for the poor?

Hardly.

Writing for the Federalist, Emily Ekins shares some in-depth polling data that discovers that envy is the real motive.

Supporters often contend their motivation is compassion for the dispossessed… In a new study, I examine…competing explanations and ask whether envy and resentment of the successful or compassion for the needy better explain support for socialism, raising taxes on the rich, redistribution, and the like. …Statistical tests reveal resentment of the successful has about twice the effect of compassion in predicting support for increasing top marginal tax rates, wealth redistribution, hostility to capitalism, and believing billionaires should not exist. …people who agree that “very successful people sometimes need to be brought down a peg or two even if they’ve done nothing wrong” were more likely to want to raise taxes on the rich than people who agree that “I suffer from others’ sorrows.” …I ran another series of statistical tests to investigate the motivations behind the following beliefs: 1) It’s immoral for our system to allow the creation of billionaires, 2) billionaires threaten democracy, and 3) the distribution of wealth in the United States is “unjust.” Again, the statistical tests find that resentment against successful people is more influential than compassion in predicting each of these three beliefs. In fact, not only is resentment more impactful, but compassionate people are significantly less likely to agree that it’s immoral for our system to allow people to become billionaires.

Here’s one of her charts, showing that resentment is far and away the biggest driver of support for class-warfare proposals.

These numbers are quite depressing.

They suggest that no amount of factual analysis or hard data will have any effect on the debate.

And there is polling data to back up Emily’s statistical analysis. Heck, some folks on the left openly assert that envy should be the basis for tax policy.

In other words, Deroy Murdock and Margaret Thatcher weren’t creating imaginary enemies.

P.S. If you think Kevin Williamson was somehow mischaracterizing or exaggerating Obama’s spiteful position on tax policy, just watch this video.

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I sometimes mock the New York Times for dodgy and inaccurate writing about economics.

Though, to be fair, the paper has many sound journalists who do a good job, so I should be more careful about explaining that the mistakes are the result of specific reporters and columnists.

Paul Krugman is an obvious example.

And we should add David Leonhardt to the list. He actually claims that imposing a wealth tax and confiscating private capital can lead to more growth.

There are two problems with the arguments from these opponents. First, they’re based on a premise that the American economy is doing just fine and we shouldn’t mess with success. …Second, …it’s also plausible that a wealth tax would accelerate economic growth. …A large portion of society’s resources are held by a tiny slice of people, who aren’t using the resources very efficiently. …Sure, it’s theoretically possible that some entrepreneurs and investors might work less hard… But it’s more likely that any such effect would be small — and more than outweighed by the return that the economy would get on the programs that a wealth tax would finance, like education, scientific research, infrastructure and more.

Wow. It’s rare to see so much inaccuracy in so few words.

Let’s review his arguments.

His first claim is utter nonsense. I’ve been following the debate over the wealth tax for years, and I’ve never run across a critic who argued that the wealth tax is a bad idea because the economy is “doing just fine.”

Instead, critics invariably explain that the tax is a bad idea because it would exacerbate the tax code’s bias against saving and investment and thus have a negative effect on jobs, wages, productivity, and competitiveness.

And those arguments are true and relevant whether the economy is booming, in a recession, or somewhere in between.

His second claim is equally absurd. He wants readers to believe that government spending is good for growth and that those benefits will more than offset the economic harm from the punitive tax.

To be fair, at least this is not a make-believe argument. Left-leaning bureaucracies such as the International Monetary Fund and Organization for Economic Cooperation and Development have been pushing this idea in recent years. They use phrases such as “resource mobilization” and “financing for development” to argue that higher taxes will lead to more growth because governments somehow will use money wisely.

Needless to say, that’s a preposterous, anti-empirical assertion. Especially when dealing with a tax that would do lots of damage on a per-dollar-collected basis.

Interestingly, a news report in the New York Times had a much more rational assessment, largely focusing on the degree of damage such a tax would cause.

Progressive Democrats are advocating the most drastic shift in tax policy in over a century as they look to redistribute wealth…with new taxes that could fundamentally reshape the United States economy. …Senators Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont have proposed wealth taxes that would shrink the fortunes of the richest Americans. Their plans envision an enormous transfer of money from the wealthy… the idea of redistributing wealth by targeting billionaires is stirring fierce debates at the highest ranks of academia and business, with opponents arguing it would cripple economic growth, sap the motivation of entrepreneurs who aspire to be multimillionaires and set off a search for loopholes. …At a conference sponsored by the Brookings Institution in September, N. Gregory Mankiw, a Harvard economist, …offered a searing critique, arguing that a wealth tax would skew incentives that could alter when the superrich make investments, how they give to charity and even potentially spur a wave of divorces for tax purposes. He also noted that billionaires, with their legions of lawyers and accountants, have proven to be experts at gaming the system to avoid even the most onerous taxes. …“On the one hand it’s a bad policy, and then the other thing is it’s a feckless policy,” Mr. Mankiw said. Left-leaning economists have expressed their own doubts about a wealth tax. Earlier this year, Lawrence Summers, who was President Bill Clinton’s Treasury secretary, warned…that wealth taxes would sap innovation by putting new burdens on entrepreneurial businesses while they are starting up. In their view, a country with more millionaires is a sign of economic vibrancy.

This is an example of good reporting. It cited supporters and opponents and fairly represented their arguments.

Readers learn that the real debate is over the magnitude of economic harm.

Speaking of which, a Bloomberg column explains how much money might get siphoned from the private economy if a wealth tax is imposed.

Billionaires such as Jeff Bezos, Bill Gates and Warren Buffett could have collectively lost hundreds of billions of dollars in net worth over decades if presidential candidate Elizabeth Warren’s wealth tax plan had been in effect — and they had done nothing to avoid it. That’s according to calculations in a new paper by two French economists, who helped her devise the proposed tax on the wealthiest Americans. The top 15 richest Americans would have seen their net worth decline by more than half to $433.9 billion had Warren’s plan been in place since 1982, according to the paper by University of California, Berkeley professors Emmanuel Saez and Gabriel Zucman. …The calculations underscore how a wealth tax of just a few percentage points might erode fortunes over time.

Here’s the chart that accompanied the article.

What matters to the economy, though, is not the amount of wealth owned by individual entrepreneurs.

Instead, it’s the amount of saving and investment (i.e., the stock of capital) in the economy.

A wealth tax is bad news because it diverts capital from the private sector and transfers it to Washington where politicians will squander the funds (notwithstanding David Leonhardt’s fanciful hopes).

So I decided to edit the Bloomberg chart so that is gives us an idea of how the economy will be impacted.

The bottom line is that wealth taxation would be very harmful to America’s economy.

P.S. Several years ago, bureaucrats at the IMF tried to argue that a wealth tax wouldn’t damage growth if two impossible conditions were satisfied: 1) It was a total surprise, and 2) It was only imposed one time.

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