Most Americans have never heard of Lloyd Blankfein or know he ran Goldman Sachs during the financial crisis. But Blankfein continues to be a popular villain for populists on the left and right. For instance, he appeared in Donald Trump’s closing 2016 commercial attacking the “global political establishment.”
And he also pops up in Elizabeth Warren’s new ad featuring billionaires who dislike her wealth tax idea. Along with Blankfein, Warren highlights criticism from investor Leon Cooperman, venture capitalist Peter Thiel, and financial entrepreneur Joe Ricketts. Warren’s closing zinger: “All we’re saying is when you make it big, pitch in two cents so everybody else gets a chance to make it.” Or in other words, “Okay billionaire.”
As demagoguery goes, it’s mild stuff. The Trump ad, by contrast, seemed to go out of its way to feature Jewish Americans and was widely criticized as anti-semetic. Warren’s rogues gallery of the rich mainly share a dislike for Warrenomics. Yet the ad is demagoguery nonetheless in its attempt to portray Warren’s critics as cold-hearted capitalists who won’t even spare a bit of pocket change to help the less blessed.
The Warren wealth tax is far more punitive than the ad suggests, even allowing for considerable political puffery. It’s not 2 cents or even 2 percent. Warren’s latest version of the wealth tax is a 2 percent tax on wealth between $50 million and $1 billion and a 6 percent tax on wealth over $1 billion. The tax is cumulative and would be applied year after year, slowly whittling down existing fortunes and preventing future megafortunes from being created. The New York Times notes that had the Warren wealth tax already been in place for decades, Jeff Bezos, the world’s richest person, would have been worth $50 billion last year instead of $160 billion, Bill Gates $14 billion in 2018 instead of $97 billion, and the Forbes 400 overall would have had an average worth of $3 billion, down from the current $7 billion.
Boo-hoo, billionaires, right? Even with a wealth tax in place, many future generations of Bezoses and Gateses won’t need to finance their Ivy League college education through loans and working the front desk at the campus rec center. They’ll probably be fine through the year 2119, at least. And besides, the rest of us need their money to pay for our college educations — not to mention our health care, child care, and housing. (Well, at least that might be the case if we want more government without a value-added or other type of consumption tax, as is found in other rich nations.)
Certainly the Warren wealth tax qualifies as the sort of “big structural change” she says America needs. But Warren surely doesn’t want to change everything. One would assume Warren wants America to remain the sort of place where ambitious dreamers create companies that eventually get so big and powerful they need someone like Warren to come along and break them up.
So here’s what Warren is asking America to believe: Under a Warren presidency, Washington would tax wealth in a way and at levels most other advanced economies have rejected. (Even Sweden, Denmark, Iceland, and Finland rolled back their wealth taxes in recent years.) But not just that. Warren also wants to sharply raise taxes on business profits, investment, and incomes overall. So kind of a lot. And despite all that big structural change, there would be no meaningful change to American private-sector innovation and investment? No change in the decision making or actions of Bezos and Gates? How can she be so sure?
Many economists aren’t. Indeed, a new study finds that the wealth tax alone would slow economic growth by nearly 0.2 percentage points a year over the course of a decade. That may not sound like much, but it’s a tenth of forecasted economic growth over the next 10 years. Moreover, the study doesn’t even try to specifically calculate the effect of the wealth tax on the sort of high-impact entrepreneurship that gave us the Google search engine, Apple’s iPhone, or Amazon Prime.
Now every rich person isn’t Bezos or Gates. But more than ever before, America’s richest of the rich started out as middle-class kids who built a super successful business. But to Warren, apparently heiresses, oligarchs, and entrepreneurs are all pretty much the same: All members of America’s “rigged economy” who need to pay up — well, need to pay up more. Much more. Okay senator.
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The Week · by James Pethokoukis · November 15, 2019