A slew of Democrats on Capitol Hill including progressives Sen. Elizabeth Warren, D-Mass., and Sen. Bernie Sanders, I-Vt. on Monday proposed a 3% total annual tax on wealth exceeding $1 billion.
They also called for a lesser, 2% annual wealth tax on the net worth of households and trusts ranging from $50 million to $1 billion.
The Ultra-Millionaire Tax Act aims at reining in a widening U.S. wealth gap, which has been exacerbated by the Covid pandemic.
“The ultra-rich and powerful have rigged the rules in their favor so much that the top 0.1% pay a lower effective tax rate than the bottom 99%, and billionaire wealth is 40% higher than before the Covid crisis began,” Warren said Monday in a statement.
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About 100,000 Americans or, fewer than 1 in 1,000 families would be subject to a wealth tax in 2023, according to Emmanuel Saez and Gabriel Zucman, economists at the University of California, Berkeley.
The policy would raise at least $3 trillion over a decade, they found.
Warren called for the tax revenues to be invested in child care and early education, K-12 education and infrastructure.
Aside from Warren and Sanders, other co-sponsors of the legislation include: Sens. Sheldon Whitehouse, D-R.I.; Jeff Merkley, D-Ore.; Kirsten Gillibrand, D-N.Y.; Brian Schatz, D-Hawaii; Edward Markey, D-Mass.; and Mazie Hirono, D-Hawaii. Reps. Pramila Jayapal, D-Wash.; and Brendan Boyle, D-Pa., are also co-sponsors.
The bill likely faces significant obstacles in the Senate, where Democrats hold the slimmest of majorities.
Some groups also forecast a wealth tax would have some negative effects.
A 2020 Tax Foundation analysis of separate Warren and Sanders wealth tax proposals during their presidential runs found they would reduce U.S. economic output by 0.37% and 0.43%, respectively, over the long term.
A wealth tax would also face administrative and compliance challenges, such as difficulty valuing assets and likely tax evasion schemes, according to the Tax Foundation.
The Ultra-Millionaire Tax Act would attempt to address some of these issues.
The legislation would invest $100 billion into IRS systems and personnel, ensure a 30% audit rate for the super wealthy, and impose a 40% exit tax on wealthy Americans who seek to renounce their citizenship to avoid a wealth tax.
CORRECTION: This article has been updated to state that the tax was proposed on Monday.