Warren, Sanders wealth taxes could double US trade deficit, study finds

The progressive candidates' proposals would also raise less than their campaigns initially estimated, the conservative group said

Wealth-tax proposals championed by Democratic presidential candidates Elizabeth Warren and Bernie Sanders could significantly increase the trade deficit over the next decade, according to a paper published this week.

Continue Reading Below

The Tax Foundation, a conservative think tank based in Washington, D.C., estimated that the average trade deficit from 2020 to 2029 would more than double under both progressive candidates' proposals. The deficit would increase from the Congressional Budget Office’s estimate of 3.10 percent to 6.94 percent under Warren’s proposal and 7.53 percent under Sanders’.


Still, shifts of that magnitude are not unprecedented: The Tax Foundation compared it to the period between 1999 and 2008, when the 10-year average trade deficit rose from 1.2 percent to 4.4 percent, a result of the so-called “China-Shock,” the rapid transition of Beijing as a key U.S. trading partner.

"A wealth tax would induce foreign inflows of hundreds of billions of dollars a year to replace reductions in U.S. savings," the report said. "Those inflows would drive up the value of the dollar and keep it elevated even as U.S. net exports collapsed."

Sanders’ campaigns did not immediately respond to a request for comment.

"Leading independent experts have concluded that Elizabeth's plans are fully paid for," a spokesperson for Warren's campaign said in a statement to FOX Business. "Her wealth tax -- popular with Republicans, Independents, and Democrats -- will produce trillions in revenue to fund middle-class investments that will grow our economy and provide families with more financial security."


Warren’s plan, which she rolled out last January, would impose a 2 percent tax on individuals with a net worth above $50 million and a 6 percent tax on those worth more than $1 billion. Sanders released a competing wealth tax plan in mid-September, with levies ranging from 1 percent on married couples with a net worth above $32 million to an 8 percent tax on wealth over $10 billion.

Warren estimates her tax would raise $3.75 trillion over 10 years, while Sanders’ could bring in about $4 trillion. Both candidates have said they intend to use the funds to pay for massive federal programs, like a single-payer health care system, tuition-free public college and universal child care.

The Tax Foundation, however, estimated that Warren’s tax would fall short of her campaign’s estimates, raking in just $2.2 trillion over the next decade. Likewise, Sanders’ tax would raise $2.6 trillion, after taking into account certain economic effects.

Taxing the richest Americans could also reduce the country’s GDP, the think tank concluded. Warren’s tax would ultimately shave growth by 0.37 percent, while Sanders’ could reduce it by 0.43 percent.


There has never been a wealth tax in the U.S. In fact, tax law in the U.S. has become significantly less progressive in recent decades. All three traditional taxes -- the individual income tax, the corporate income tax and the estate tax -- have weakened. For instance, the top marginal federal income tax rate has fallen dramatically, from more than 70 percent between 1936 and 1980 to 39 percent in 2019.

“As a result, when combining all taxes at all levels of government, the U.S. tax system now resembles a giant flat tax,” French economist Gabriel Zucman, who helped to advise Warren’s wealth tax policy, wrote recently. “All groups of the population pay rates close to the macroeconomic tax rate of 28 percent, with a mild progressivity up to the top 0.1 percent and a significant drop at the top-end, with effective tax rates of 23 percent for the top 400 Americans.”