Democrats give cold shoulder to Warren wealth tax

Democrats are giving a cold shoulder to Sen. Elizabeth Warren’s proposed wealth tax, one of the centerpieces of her presidential campaign.

The Massachusetts Democrat’s proposal is meant to address rising inequality in the United States. It would impose a 2 percent tax on the wealth of people with more than $50 million in assets, while those with assets more than $1 billion would face a 3 percent tax. 

Warren would use revenue from the plan to pay for student debt relief, universal access to pre-K, child care and increased pay for child care workers.

{mosads}Warren has seen her stock rise in the Democratic presidential primary in part on the strength of a string of plans she has presented on public policy. She’s just trailing former Vice President Joe Biden in a couple of recent national polls, and the wealth tax has approval from two-thirds of Americans, including 55 percent of Republicans, according to a poll by The New York Times.

But Democrats in charge of tax legislation on Capitol Hill have kept their distance from the plan, refusing to endorse the concept. They’ve instead focused on raising capital gains taxes and income taxes on the wealthy, as well as anti-poverty policies.

Rep. Richard Neal (D-Mass.), the chairman of the House Ways and Means Committee, which oversees tax policy, questioned how much revenue the wealth tax would actually raise.

“I think that one of the problems with it, when you examine it, is how much income does it generate?” said Neal, who in an interview with The Hill repeatedly pivoted to higher income and corporate taxes in response to questions about the wealth tax.

Sen. Ron Wyden (Ore.), the top Democrat on the Senate Finance Committee, demurred three times when asked if he supported the proposal.

He decried a system that allowed “the well-connected and the high flyers” to squirrel away funds in tax havens like the Cayman Islands and pay lower rates for capital gains. But when pressed for his views on a wealth tax, he would only point to his own tax proposals.

“I’m going to leave it at what I just said, which is that the current tax system is stacked against the working-class person [and] does not treat them fairly,” he said.

There are a few reasons that could explain the reticence of congressional Democrats to back the proposal.

One is to avoid taking sides in the Democratic primary by backing specific policy proposals from a candidate.

Capitol Hill Democrats also appear to be focusing on their own bills.

“I know Warren has a plan for everything, but people here have their own stuff going on,” said a Democratic House aide. “I don’t see anything coming off the campaign trail yet as having really broken through the bubble.”

Democrats have avoided taking on Trump’s tax cut law passed at the end of 2017, even though then-House Minority Leader Nancy Pelosi (D-Calif.) called it “the worst” law Congress had ever passed. Since becoming Speaker, Pelosi has not sought to repeal it.

Legislation to repeal Trump’s tax cuts would go nowhere in the GOP Senate, but that hasn’t stopped Democrats from passing other bills that will not be taken up by Senate Majority Leader Mitch McConnell (R-Ky.).

That suggests Democrats want to avoid handing the GOP ready-made talking points for 2020 about Democrats wanting to raise people’s taxes.

{mossecondads}Democrats have sought to eliminate parts of the Trump tax law to pay for their own bills. This provides a political benefit, since Democrats can emphasize what they are doing, such as expanding the earned income tax credit, a form of negative income tax for low earners, and the child tax credit.

There has been a debate over whether Warren’s wealth tax proposal is feasible and over how much revenue it might bring in.  

Critics argue it could be easy to avoid since the wealthy are adept at hiding their assets. It’s also more difficult to price the worth of antiques and art than a house’s property value.

Warren has said the tax would bring in $2.75 trillion in revenue over a decade, a figure based on the work of two University of California, Berkeley economists, Emmanuel Saez and Gabriel Zucman. 

But critics such as Larry Summers, a Democrat and former Treasury secretary, have offered some skepticism. Summers in a Washington Post op-ed wrote that, based on existing revenues from estate taxes, “a wealth tax will not yield the revenue that its proponents hope for.” 

Warren’s campaign points to tough anti-evasion measures and a significant investment in IRS monitoring for the wealth tax.

“The wealth tax is extremely popular, with majorities of Democrats, Independents, and Republicans supporting it,” said Warren campaign spokeswoman Saloni Sharma.

“Elizabeth will continue making the case that it is the kind of big, structural change we need to create an economy that works for everyone, not just those at the very top,” she added. 

Sen. Sheldon Whitehouse (D-R.I.), another Finance member, said that the guiding light for Democrats should be the “Buffett rule,” named for famed investor Warren Buffet, who complained that his tax rates were ultimately lower than his own secretary’s. 

“I would start from the proposition that tax rates should be progressive and wealthier and higher income people should pay higher tax rates [than] poorer and lower earning people,” Whitehouse said, setting aside questions about the wealth tax.  

“Then, you know, you can sort of solve that problem in a whole variety of different ways,” he added.

Even progressives in the House have stopped short of endorsing Warren’s call for a wealth tax.

Rep. Mark Pocan (D-Wis.) noted that many Democrats have offered tax plans.

“So many candidates have proposals right now that I don’t think we’ve been chasing the presidential candidates proposals,” said Pocan, the co-chair of the Congressional Progressive Caucus.

While open to the idea of a wealth tax, he said his caucus was focusing on expanding the earned income tax credit and having it distributed monthly instead of just once a year.

“I think that’s really what captivates more of our current interest is taking a look at that,” he said.

Rep. Ro Khanna (D-Calif.), a progressive who is backing Sen. Bernie Sander (I-Vt.) in the presidential race, questioned whether Warren’s proposal would lead to a stock sell-off that would be harmful.

“The one concern I have about it is whether it would compress asset prices if it led to a sell off of immediate assets, stocks, to pay it,” Khanna said. 

He said he thought there were “other ways of raising revenue” to pay for new spending, including broader estate and capital gains taxes, as proposed by Sanders. 

One prominent progressive who does back Warren’s idea for a wealth tax is Rep. Alexandria Ocasio-Cortez (D-N.Y.).

“I think a wealth tax is appropriate,” said Ocasio-Cortez, who is backing the Green New Deal climate change plan that would invest billions in new energies.

The freshman congresswoman has proposed her own plan to raise revenue with a 70 percent marginal tax rate on very high income.

Andrew Feldman, a Democratic strategist, says members of Congress may be reticent to embrace an idea that’s so new on the scene until they see how their own constituents embrace it.

“Warren is running a presidential campaign. Everything she does is tied back to her main theme of structural change and inequality. But that’s not what the focus should be in these districts, where the focus should be on the specific needs of the community,” he said.

Democrats also should be wary of proposals that would fuel Republican accusations of socialism and make them more resonant, he added.

“The reality is that in many of these Trump districts, we have to be careful with how we message,” he said.