Elizabeth Warren’s Ultra-Millionaire Tax

Elizabeth WarrenThe most exciting thing in the Democratic presidential primary has been Elizabeth Warren’s stream of policy proposals. Over time, I’d like to dive into them. Today, I will look at her Ultra-Millionaire Tax.

She starts by highlighting work by economists Emmanuel Saez and Gabriel Zucman (PDF) who first looked into this idea in 2016. It includes an amazing fact that I don’t think most people grok: in 1986, the bottom 90 percent of Americans owned 38 percent of the wealth here. In 2014, it was 25 percent. So let me provide a little context.

The average wealth of the bottom 90 percent in 1986 was roughly $80,000. In 2014, it was roughly $83,000. These are inflation-adjusted numbers, so the bottom 90 percent did see real gains: 0.1 percent per year.

During the same time, the average wealth of the top 1 percent increased from $5.2 million to $14 million. That’s a real gain of 6.0 percent per year — 45 times the relative gains of the bottom 90 percent. I don’t have the data for the top 0.1 percent, but it would be much more extreme.

Note also that during the housing bubble the wealth of the bottom 90 percent went way up — as did the wealth of the top 1 percent. After the crash, both groups saw their wealth decline. But the top 1 percent didn’t see it decline as much, and after two years, it had turned around. The bottom 90 percent saw their wealth decline and then stagnate.

This is not an accident — just the way the world is in a globalized economy. Dean Baker (PDF) has shown that the current situation we have where most people see little or no gain from productivity growth is the result of government policy. This is the way that our leaders have chosen to make it.

The Rich Aren’t Taxed Enough

I’ve written before about how the poor and middle classes get screwed by the tax system. One part of this is shown by how much everyone but the very rich pay compared to the very rich:

Group Wealth Taxed Relative Taxation
Top 0.1% 3.2% 100%
Bottom 99% 7.2% 225%

Like most taxation in the United States, this is regressive. Conservatives always claim that they want a flat tax. But they only apply this to progressive taxes. They don’t even mention all the regressive taxes.

Beyond Income Tax

Warren makes an excellent point about why the income tax — even if improved to be more progressive — is not enough:

While we must make income taxes more progressive, that alone won’t straighten out our slanted tax code or our lopsided economy. Consider two people: an heir with $500 million in yachts, jewelry, and fine art, and a teacher with no savings in the bank. If both the heir and the teacher bring home $50,000 in labor income next year, they would pay the same amount in federal taxes, despite their vastly different circumstances. Increasing income taxes won’t address this problem.

As a result, she proposes a wealth tax.

Ultra-Millionaire Tax

There are various policies we need to change to reverse this that go beyond taxation (intellectual property law, for example). But Elizabeth Warren’s proposal is essential.

The tax itself is pretty modest: 2% on net worth over $50 million and below $1 billion; and 3% on net worth over $1 billion. There would be no new tax on anyone with a net worth of less than $50 million. That’s pretty generous, I would say. That means only 75,000 American households would pay any of this modest tax. That doesn’t mean they won’t fight it with all their substantial resources.

Saez and Zucman estimate this would bring in $2.75 trillion over the first decade. According to the CEPR Budget Calculator, this represents an increase of about 5 percent in revenue.

To give you some scale, SNAP and other food assistance programs costs the federal government roughly $70 billion per year — that’s roughly one-quarter of how much the Ultra-Millionaire Tax would raise. That provides some kind of idea how much good could be done with the money. At the same time, our military budget is roughly $600 billion per year — roughly 2.2 times as much as the wealth tax raises. (Eternal war is expensive.)

Details, Details

Some people may be thinking that the rich will just find a way to evade this tax. But Warren has put in a number of measures to avoid this. One is that the tax applies to all wealth — even that held outside the country. It also increases enforcement by funding more IRS agents and establishing a minimum audit level for people with wealth above $50 million.

Perhaps best of all, the Ultra-Millionaire Tax goes after the (false) claim of the rich that they will just leave the country. Warren says, “Fine!” But there is a 40 percent tax on net worth above $50 million for people who emigrate.

Warren also claims that the Ultra-Millionaire Tax would allow us to improve our procedures in the implementation of the Estate Tax to remove loopholes. So we would likely get more from it. (Also: we need to greatly increase the Estate Tax.)


There’s more about the Ultra-Millionaire Tax at Elizabeth Warren’s website. Win or lose, she is expanding the policies that Democrats think about. And these policies are wildly popular with the bases of Bernie Sanders, Kamala Harris, and Joe Biden alike.

Article updated to reflect Barney’s criticism.

This entry was posted in Politics by Frank Moraes. Bookmark the permalink.

About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

9 thoughts on “Elizabeth Warren’s Ultra-Millionaire Tax

  1. FWIW, GDP per capita wouldn’t necessarily track *wealth* – GDP being yearly ‘income’ rather than total net assets owned with no idea of time. However, Saez and Zucman did plot the average wealth for the 90% in their paper – graph B, Figure VII, page 38: https://gabriel-zucman.eu/files/SaezZucman2016QJE.pdf

    This shows a hump in the real average wealth of the 90% from about 1998-2008, which graph A shows was basically the housing boom and bust. After that, however, the average was indeed back to roughly the 1986 level (it’s all in constant 2010 dollars) – about $80,000 per household (and that includes personal pension investments). In that time, the top 1% went from about $5 million to $14 million.

    • Yeah, I knew it wasn’t the same but I was having difficulty finding wealth numbers. Figure VII is really good. It shows how the housing crisis caused most of nation to lose everything it had gained and more. But the 1% saw a temporary hit and then went back to their trend line. In other words, the government response to the crisis was to do nothing for most Americans and make sure the rich weren’t harmed.


    • I’ve updated the article. Despite the housing bubble, the bottom 90 percent end up in the same place in 2014 as they were in 1986. During that period, the top 1 percent sees its wealth grow 6.0% per year while the bottom 90 percent see its wealth grow by 0.1% per year. And given the way this data is structured, these minor gains are almost all due to the top of the 90 percent. The bottom of it have certainly seen their wealth decline.

      Thanks for noticing this. I was trying to get this out fast last night and was being lazy.

  2. I like this. “What if the rich people all leave?” Well, don’t let the door hit you on the ass on the way out. You’re antisocial jerks, anyway, and we’re better off without you. By the way: you will pay before or after you go. We have armies on every continent, huge influence in every major financial institution on Earth. Might as well use this power for good, for once. Get these guys.

    I love the evolution of how right-wingers have sold trickle-down economics:

    1. Cutting taxes on the super-rich creates growth. Nope. Absolutely nobody believes this anymore.
    2. Taxing the rich is morally wrong, a form of theft. This argument sold for awhile, but people are getting wise to it. Shitty pay for hard work is worse theft. Almost everyone gets this in their bones.
    3. If you tax the rich, they’ll all leave, and won’t you be sorry! Oh, blow it out your nose, Ayn Rand.

    • I’m not sure where the rich think they will go. The only low-tax havens are bad places to live. As I’ve remarked in the past, if John Galt and his friends all left, it would make no difference. Other people would just step up. I’ve worked at too many places where some “amazing” person left and somehow the place got on fine without them. We like to mythologize individuals but when it comes to economic policy, we need to think in terms of the system.

    • I can’t believe I haven’t seen that before! I’ve been making that point about Atlas Shrugged for a decade.

      You know, Rand’s fiction is a kind of early safe space for the rich. It tells them everything they want to believe. And it tells them that other people don’t believe it because they are emotional and irrational. That reminds me: it’s really interesting how many people who started out of New Atheists turned into anti-SJW warriors. It’s part of the same thing: people who claim they just follow the fact somehow ignoring them when they conflict with their prejudices. Not that I have so much of a problem with that: we are irrational. But people who claim they only look at the world rationally remind me of people who claim that commercials don’t affect their buying decisions — they are generally the worst marks. So it isn’t surprising that such people would end up allowing their racism to flood out of them. And Rand was a horrible racist.

      • It was funny this morning. Mrs. James was watching a YouTube playlist of various public intellectuals on her IPad, and I was reading a book, half-listening.

        One guy comes on, and he’s this combo of the worst psuedo-scholarship with a really foul anti-SJW burr up his butt. I asked, “is this Jordan Peterson?” “Yes, you know him?”

        No, I don’t. I’ve never read him, only seen a few seconds of him on Maher one time, couldn’t identify his voice if other people were reading those words.

        But I know of him, and how worshipped he is in the anti—SJW, half-bright crummyverse. It was either him or Hitchens, and I know what Hitchens sounded like, so, process of elimination, it’s either Peterson, or some new one I haven’t heard of. I guessed correctly.

        • It’s interesting that you compared Peterson and Hitchens. There isn’t a lot of difference. The one thing that binds these people together is how they fall to pieces about SJWs. Hitchens was an atheist and Peterson is a Christian, yet they appeal to the same “just tellin’ it like it is” crowd that somehow always believes that being an asshole is what the Truth is. I don’t think any of these people would be popular if it weren’t for their most base attribute. Certainly Hitchens wasn’t popular because he was a good prose stylist.

Leave a Reply

Your email address will not be published. Required fields are marked *