During the last presidential debate Senator Elizabeth Warren talked about her plan to punish those who are the most success in this country. Of course she did not use the word punish, preferring to use one of the usual progressive platitudes. I’m sure you can guess which one in a microsecond. Warren is not the only democratic presidential candidate pushing a wealth confiscation scheme, at least two others are.
This type of wealth confiscation has been tried in several states and a great many countries with the same disastrous results. The Mises Institute article The Problem with Elizabeth Warren’s Wealth-Tax Plan discusses Senator Warren’s plan in great detail.
The central argument of Warren’s the wealth-tax proposal is this: through a progressive wealth tax system — which means those with more wealth will pay higher tax rates — the wealthiest people in America will pay their “fair share” and that fair share will enable the equal redistribution of wealth.
As you can see from the first component of her proposal, this is not just a tax increases of 2 percent on income, this is a tax on assets and wealth. Components two and three prove that this is just the beginning,
First, households would pay an annual 2 percent tax on all assets for net worth equal or less than $50 million. Individuals and families who are worth more than a $1 billion would pay a 3 percent tax . Second, the Warren forecasts a revenue of $2.75 trillion, and that would be allocated in the creation of new government programs such as universal child care for every child age zero to five; universal pre-k for every three- and four-year-old; student-loan forgiveness; free tuition and fees for all public technical schools, two-year colleges and four-year colleges. Third, the Warren proposal aims to heavily tax corporations so that they would pay their so-called “fair share.”
The proposed 2 percent tax on the wealthy will only fund a tiny fraction of those new programs and there is no mention of the flagship progressive pipe dream, Medicare for All. A massive amount of federal bureaucracy and regulation will be needed to ensure corporations pay their fair share. This is discussed in the next quote.
The first consequence will be the significant expansion of federal authority over the economy. Even if, in theory, the Warren wealth-tax plan targets only the super wealthy at first, this does not mean that the middle-class is exempted from a potential rise in income tax. For Elizabeth Warren to fund all the programs that she wants to implement, taxing the billionaires — even at a very high level — won’t be enough. The middle-class will eventually be forced to contribute to the funding of these programs, which means that the plan, instead of alleviating the wealth gap, will reduce the purchasing power of the middle-class. This means that ordinary citizens will have a hard time saving for their retirement or to invest in business ventures. Moreover, the plan gives the federal government more extensive power and authority over the allocation of resources and the economy as a whole.
How bad will results of the plan be? Check out the next quote.
As a result, federal agencies will have far greater control over how resources will be allocated and invested throughout the broader economy. Yet, experience suggests government allocates resources inadequately and inefficiently, while distorting markets, and leading to bubbles and malinvestments.
The second consequence will be a great decrease in productivity for the economy overall. Indeed, those who already own large amounts of assets often own those assets because they have managed to put them to good use expanding the economy and increasing employment. The wealth tax, meanwhile, is built on the premise that government agents can convert that wealth into cash payments, and that the government knows better how to distribute it.
Mass exoduses of those who produce always occur when these wealth redistribution schemes are implemented which result in a large scale decrease in wealth and standard of living. This will happen here because:
The Warren wealth tax plan may confiscate the material wealth of wealthy persons and families. But those same people can take their know-how and move elsewhere. The impact on American productivity would not be positive.
At first the negative consequences of Senator Warren’s plan may only affect the wealthy. This won’t last long. Very quickly the negative effects will spread down to the middle class. This conclusion was reached by the author of the Mises article.
Senator Warren’s wealth tax plan, despite the well-intended programs that it will generate; will end up as merely a tool to increase the power of Washington policymakers. Over time, taxes will creep down the income scale as the income tax did, eventually hiking the tax burden for the middle class, while also cutting productivity which will drive down wages and wealth for everyone.
Very rapidly the negative consequences of the Warren wealth confiscation plan will ripple through the economy, eventually turning into a tidal wave of destruction. This has happened wherever this type of plan has been implemented.