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We're (appropriately) digging a big hole in the budget we'll need to start filling once the economy recovers. Many will again call for a wealth tax, so it's worth reiterating just how little revenue they raise, even with optimistic assumptions. Thread:
Warren's wealth tax proposal, which peaks at a near-unprecedented 6% rate, would raise about $2.3 trillion over a decade. That might cover our total outlays--without interest--from combating Covid-19 this year. It'd also cut wages and long-run GDP by 1-2%. https://budgetmodel.wharton.upenn.edu/issues/2019/12/12/senator-elizabeth-warrens-wealth-tax-projected-budgetary-and-economic-effects
The Sanders wealth tax, which would go to an even higher 8% and kick in at $32 million, would raise about $2.8 trillion over a decade, possibly covering total Covid-19 costs. It'd cut wages and GDP by 1% if funding deficit reduction, more otherwise. https://budgetmodel.wharton.upenn.edu/issues/2020/1/23/sanders-wealth-tax
Both Warren and Sanders claimed that their wealth taxes would raise a lot more than these @BudgetModel numbers. As I wrote here, the economists who produced those estimates made basic errors and twisted their assumptions to arrive at generous results. https://medium.com/@MaxGhenis/warrens-wealth-tax-would-raise-less-than-she-claims-even-using-her-economists-own-assumptions-bea43840bc0a
Developing countries will also need to raise more revenue. A 2018 paper found that Colombia's wealth tax, which phased in at wealth around $500,000 USD and went up to 6%, raised ~0.25% of GDP. Better enforcement might bring that up to 0.3%. That's nothing! https://eml.berkeley.edu/~saez/course/londono-wealth2018.pdf
It's true that progressive wealth taxes would made the tax code more progressive. But a progressive tax code doesn't make for a progressive government if you don't have enough for generous transfers. The US knows this well. https://www.washingtonpost.com/news/wonk/wp/2013/04/05/americas-taxes-are-the-most-progressive-in-the-world-its-government-is-among-the-least/
If we only care about repaying Covid-19 debts, an extreme wealth tax might do it. But if we also want to expand the welfare state to anything near European levels, we'll need broad-based taxes like a VAT, which could raise ~4x the wealth tax. https://www.cbo.gov/budget-options/2018/54820
A robust VAT could fund a generous government, so we could finally quit our penny-pinching means-testing and fix the broken systems causing so much trouble right now.
If we spent the extra money on UBI, it'd be highly progressive.
It's what we need.
/end https://medium.com/ubicenter/distributional-analysis-of-andrew-yangs-freedom-dividend-d8dab818bf1b
If we spent the extra money on UBI, it'd be highly progressive.
It's what we need.
/end https://medium.com/ubicenter/distributional-analysis-of-andrew-yangs-freedom-dividend-d8dab818bf1b
