So-called ‘ultra-millionaire tax’ would slash US GDP over next 30 years
The so-called “ultra-millionaire tax” would slash the country’s Gross Domestic Product (GDP) — the market value of all the goods and services produced within the U.S. — by 0.6% in 2031 and 0.8% in 2040, according to the Penn Wharton Budget Model analysis. The tax would also have a detrimental effect on wages, reducing the hourly rate by 0.7% in 20313, 1% in 2040 and 1.2% in 2050, the model shows.
Warren’s proposal, which is nearly identical to the wealth tax that she introduced during her failed 2020 presidential campaign, would impose a 2% annual tax on the net worth of U.S. households above $50 million and would add an additional 1% levy on households worth more than $1 billion.
The Massachusetts Democrat estimates the Ultra-Millionaire Tax Act would affect about 100,000 households in the U.S., or roughly 0.05% of the population, and would generate about $3 trillion in revenue over the next decade based on estimates from Emmanuel Saez and Gabriel Zucman, economists at the University of California, Berkeley.
But the Penn Wharton researchers estimated that Warren’s tax on the top sliver of rich U.S. households would raise about $2.1 trillion over the next decade — almost $1 trillion less than she projected.
In an effort to prevent wealthy Americans from dodging the tax, the bill would create a 40% tax on net worth above $50 million for people who renounce their U.S. citizenship in order to avoid paying the fee and a 30% minimum audit rate for households subject to the tax. It would also provide the IRS with an additional $100 billion to help with enforcement.
Factoring in the new enforcement measures, Penn researchers said that her tax could raise as much as $2.4 trillion, slightly closer in line with Warren’s own projections.
Warren has suggested the money could go toward investments in child care and early education, K-12 and infrastructure, “all of which are priorities of President Biden and Democrats in Congress,” she said recently.
Still, it’s unclear whether the Biden administration supports a wealth tax. Treasury Secretary Janet Yellen has said the White House is open to such a levy, but could achieve a similar result with other taxes that Biden proposed during the 2020 presidential campaign.
That includes raising the corporate tax rate to 28% from 21%, increasing the income tax rate on individuals earning more than $400,000, expanding the estate tax, creating a higher capital gains tax rate for individuals earning at least $1 million annually and paring back tax preferences for so-called pass-through businesses.