There’s Value in Trying a Wealth Tax

There was a bit of a kerfuffle in economics-land recently over how much money could be raised by a federal wealth tax. Economists Emmanuel Saez and Gabriel Zucman, who are working with presidential candidate and Senator Elizabeth Warren on a proposal for a 2% federal wealth tax on Americans with more than $50 million, claim that the levy would raise $187 billion in the first year (not counting an additional proposed surtax on billionaires). But writing in the Washington Post, economist and longtime Democratic policy adviser Larry Summers and law and finance professor Natasha Sarin cast doubt on that figure, and argued that the tax would raise much less -- perhaps only $25 to $75 billion a year.

Summers and Sarin base their estimate on the estate tax. The U.S. government now collects about $10 billion in taxes on estates worth more than $50 million. Since the rate on the top estate tax bracket is 40%, and assuming that 2% of rich people die every year, Summers and Sarin calculate that a 2% wealth tax on those same fortunes would raise about $25 billion.