DYLAN WALCZAK, Staff Writer—The most recent Democratic Primary debate introduced yet another rising issue to the American people: the wealth tax. Bernie Sanders and Elizabeth Warren possess the most acknowledged plans at this point, improving upon the flaws of the wealth tax in Europe.
Their aims of diminishing economic inequality between social classes are a bold challenge to American capitalism.
When the top one percent pay a smaller percentage of income tax than the middle and lower class, action is obviously dire for the livelihood of those within the middle class.
However, little discussion has been geared toward the potential setbacks of such actions.
As it pertains to the wealth tax, both senators’ plans increase rates near where they were around the mid-20th century. Senator Warren’s tax establishes a 2 percent rate for any wealth above $50 million; this results in at least a $1 million tax return. She also proposes a 3 percent rate for any wealth above $1 billion; this guarantees a bare minimum $30 million tax return. Senator Sanders’s plan is much more aggressive, implementing an 8 percent rate for wealth exceeding $10 billion.
There is no doubt about these plans’ effectiveness in removing the economic inequality gap.
However, why is the Democratic party so quick to neglect the notion of raising taxes that already exist, such as the household and income tax, to a number implemented prior to its institutionalized decline?
In 1960, these rates were at a stealthy 56 percent. Now that the Democratic party holds the majority in both houses of Congress, they have the power to overturn the consistent decline of tax rates, including the most recent tax burden under the Trump administration in 2017.
Democrats have a much more viable opportunity to provoke change through revising policies that already exist, especially with the expertise and willpower they have consistently practiced.
This revision process is especially appealing when considering arguments against the wealth tax’s constitutionality. Article 1 Section 9 of the Constitution condemns “direct taxes” on people or property unless they’re distributed among the states by population.
Therefore, any individualized tax would also have to be recompensed at the expense of the middle and lower class, the population that already takes the biggest hit in tax rates.
This also refutes proposals to tax private property of the top one percent, including commissioned artwork, yachts, or any other lavish investments. As is suggested by Section 9, the middle and lower class’s private properties would nevertheless have to be taxed to some extent.
We also have to consider the philanthropic work in which the top one percent engages. While contributions to nonprofits are tax deductible in most cases, the 2018 U.S. Trust Study of High Net Worth Philanthropy found that only 17 percent of the top one percent were always motivated by tax deductions to give their money.
Among the motives that may preside within the top one percent, higher education tends to be a favorite cause.
The 2018 Giving USA report found that colleges received the second-highest share of the $14.7 billion that America’s wealthiest donors contributed. And that makes sense.
Even when we think about our own institution, Denison arrives at an $836.4 million endowment as of 2018 because of alumni that have worked to obtain wealth and give back.
There are a lot of moving components to consider with this wealth tax. That’s not to say that it couldn’t work, even with its intentions of improving our economic circumstances.
Nevertheless, it comes down to establishing a balance between holding the top one percent accountable for their manipulative corruption of the American economy and continuing to enable their methods of giving back.
Dylan Walczak ‘22 in an English creative writing and political science double major from Louisville, Ohio.