This article is part of David Leonhardt’s newsletter. You can sign up here to receive it each weekday.
Does this sound like a healthy economy to you?
In nine of the last 10 years, the economy has grown more slowly than professional forecasters had predicted.
Annual G.D.P. growth has not reached 3 percent in almost 15 years.
Median net worth for American households has declined, after adjusting for inflation, since the late 1990s.
Those are all big warning signs. They show that the United States is suffering through an era of slow growth — and that the gains from that growth are flowing disproportionately to a small slice of mostly affluent households, making the gains for everyone else even smaller than the disappointing G.D.P. statistics would indicate.
All of which leaves me perplexed by some of the commentary about the wealth taxes proposed by Elizabeth Warren and Bernie Sanders. From a story in The Times: “The idea of redistributing wealth by targeting billionaires is stirring fierce debates at the highest ranks of academia and business, with opponents arguing it would cripple economic growth, sap the motivation of entrepreneurs who aspire to be multimillionaires and set off a search for loopholes.”
[Listen to “The Argument” podcast every Thursday morning, with Ross Douthat, Michelle Goldberg and David Leonhardt.]
There are two problems with the arguments from these opponents. First, they’re based on a premise that the American economy is doing just fine and we shouldn’t mess with success. But as the statistics above make clear, the economy is not doing fine. The country should be looking for new approaches.
Second, while it’s plausible that a wealth tax might further depress economic growth, it’s also plausible that a wealth tax would accelerate economic growth. Somehow, the opponents leave out that part.
How would it accelerate growth? Right now, the American economy is suffering from extreme inequality. A large portion of society’s resources are held by a tiny slice of people, who aren’t using the resources very efficiently. As my colleague Paul Krugman wrote this week, referring to Warren’s plans, “The only people who would be directly affected by her tax proposals are those who more or less literally have more money than they know what to do with.”
Sure, it’s theoretically possible that some entrepreneurs and investors might work less hard because of a 2 percent annual tax on their holdings above $50 million (the tax threshold under the Warren plan), thus sapping economic growth. But it’s more likely that any such effect would be small — and more than outweighed by the return that the economy would get on the programs that a wealth tax would finance, like education, scientific research, infrastructure and more. Those basic investments all have a long record of lifting economic growth. The very wealthy, however, don’t tend to spend much of their money building roads, starting community colleges or financing clean energy.
So don’t be fooled by the scaremongering. A wealth tax would have a significant effect on the economy’s distribution but probably only a modest effect on the growth rate. And if anything, the tax is likely to be pro-growth.
Of course, the people who would lose money from a wealth tax understand that defending today’s severe levels of inequality isn’t a very persuasive argument. Instead, they have opted to make flimsy predictions about how a wealth tax would somehow end up hurting the nonwealthy.
For more …
Gene Sperling, the former economic adviser to Bill Clinton and Barack Obama, has made a detailed case for a wealth tax, and Michael Strain of the American Enterprise Institute has made the case against it.
Polls have repeatedly shown that most Americans support such a tax.
The Sanders wealth tax is significantly more aggressive than the Warren version, as an analysis by the economists Emmanuel Saez and Gabriel Zucman, both of the University of California, Berkeley, shows. I prefer the Warren version.
If you are not a subscriber to this newsletter, you can subscribe here. You can also join me on Twitter (@DLeonhardt) and Facebook.
Follow The New York Times Opinion section on Facebook, Twitter (@NYTopinion) and Instagram.
David Leonhardt is a former Washington bureau chief for the Times, and was the founding editor of The Upshot and head of The 2020 Project, on the future of the Times newsroom. He won the 2011 Pulitzer Prize for commentary, for columns on the financial crisis. @DLeonhardt • Facebook
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Home » Analysis & Comment » Opinion | A Wealth Tax Is Pro-Growth
Opinion | A Wealth Tax Is Pro-Growth
This article is part of David Leonhardt’s newsletter. You can sign up here to receive it each weekday.
Does this sound like a healthy economy to you?
In nine of the last 10 years, the economy has grown more slowly than professional forecasters had predicted.
Annual G.D.P. growth has not reached 3 percent in almost 15 years.
Median net worth for American households has declined, after adjusting for inflation, since the late 1990s.
Those are all big warning signs. They show that the United States is suffering through an era of slow growth — and that the gains from that growth are flowing disproportionately to a small slice of mostly affluent households, making the gains for everyone else even smaller than the disappointing G.D.P. statistics would indicate.
All of which leaves me perplexed by some of the commentary about the wealth taxes proposed by Elizabeth Warren and Bernie Sanders. From a story in The Times: “The idea of redistributing wealth by targeting billionaires is stirring fierce debates at the highest ranks of academia and business, with opponents arguing it would cripple economic growth, sap the motivation of entrepreneurs who aspire to be multimillionaires and set off a search for loopholes.”
[Listen to “The Argument” podcast every Thursday morning, with Ross Douthat, Michelle Goldberg and David Leonhardt.]
There are two problems with the arguments from these opponents. First, they’re based on a premise that the American economy is doing just fine and we shouldn’t mess with success. But as the statistics above make clear, the economy is not doing fine. The country should be looking for new approaches.
Second, while it’s plausible that a wealth tax might further depress economic growth, it’s also plausible that a wealth tax would accelerate economic growth. Somehow, the opponents leave out that part.
How would it accelerate growth? Right now, the American economy is suffering from extreme inequality. A large portion of society’s resources are held by a tiny slice of people, who aren’t using the resources very efficiently. As my colleague Paul Krugman wrote this week, referring to Warren’s plans, “The only people who would be directly affected by her tax proposals are those who more or less literally have more money than they know what to do with.”
Sure, it’s theoretically possible that some entrepreneurs and investors might work less hard because of a 2 percent annual tax on their holdings above $50 million (the tax threshold under the Warren plan), thus sapping economic growth. But it’s more likely that any such effect would be small — and more than outweighed by the return that the economy would get on the programs that a wealth tax would finance, like education, scientific research, infrastructure and more. Those basic investments all have a long record of lifting economic growth. The very wealthy, however, don’t tend to spend much of their money building roads, starting community colleges or financing clean energy.
So don’t be fooled by the scaremongering. A wealth tax would have a significant effect on the economy’s distribution but probably only a modest effect on the growth rate. And if anything, the tax is likely to be pro-growth.
Of course, the people who would lose money from a wealth tax understand that defending today’s severe levels of inequality isn’t a very persuasive argument. Instead, they have opted to make flimsy predictions about how a wealth tax would somehow end up hurting the nonwealthy.
For more …
Gene Sperling, the former economic adviser to Bill Clinton and Barack Obama, has made a detailed case for a wealth tax, and Michael Strain of the American Enterprise Institute has made the case against it.
Polls have repeatedly shown that most Americans support such a tax.
The Sanders wealth tax is significantly more aggressive than the Warren version, as an analysis by the economists Emmanuel Saez and Gabriel Zucman, both of the University of California, Berkeley, shows. I prefer the Warren version.
If you are not a subscriber to this newsletter, you can subscribe here. You can also join me on Twitter (@DLeonhardt) and Facebook.
Follow The New York Times Opinion section on Facebook, Twitter (@NYTopinion) and Instagram.
David Leonhardt is a former Washington bureau chief for the Times, and was the founding editor of The Upshot and head of The 2020 Project, on the future of the Times newsroom. He won the 2011 Pulitzer Prize for commentary, for columns on the financial crisis. @DLeonhardt • Facebook
Source: Read Full Article