Under the sweeping tax proposals introduced by Democratic presidential candidate Elizabeth Warren, some billionaires and multimillionaires could see their federal tax rate climb above 100 percent.
Tax rates higher than 100 percent could result from the combination of several tax hikes the Massachusetts senator has called for on the ultra-wealthy, as first reported by The Wall Street Journal. That includes increasing the top income-tax rate to 39.6 percent from 37 percent; imposing a new 14.8 percent tax on Social Security; slapping a 6 percent tax on individuals worth more than $1 billion and requiring investors to pay capital-gains taxes at the same rates as other incomes
For instance, a billionaire with a $1,000 investment who earns a 6 percent return, or $60, as a capital gain, dividend or interest could owe 58.2 percent of that, or $35 in federal tax. On top of that, that person would be hit with a 6 percent wealth tax, or an additional $60. The result: taxes as high as $95 on income of $60 for a combined tax rate of 158 percent, according to the Journal.
“If you raise tax rates so high that you start raising less revenue because people work less, they save less, they hide their money more, then there’s more tax evasion, then it might be counterproductive,” George Yin, a professor emeritus of law and taxation at the University of Virginia School of Law, told FOX Business. Yin previously served as the chief of staff of the congressional Joint Committee on Taxation.
In recent weeks, Warren has been feuding with a number of notable billionaires, including former Goldman Sachs CEO Lloyd Blankfein, money manager Leon Cooperman and Microsoft founder Bill Gates, over her vow to introduce a wealth tax.
“In my opinion, she represents the worst in politicians as she’s trying to demonize wealthy people because there are more poor people than wealthy people,” Cooperman told CNBC this week.
Warren estimates that 75,000 households, or 0.1 percent of the population, would be hit with her wealth tax.
Warren’s laundry list of taxes, which lean heavily on Wall Street and the wealthy, would pay for a number of wide-ranging policies, including universal child care, Medicare-for-All and the elimination of most student loan debt.
A rival for the Democratic nomination, Vermont Sen. Bernie Sanders, has introduced a cadre of similar tax proposals, including a wealth tax that ranges from a 1 percent levy on couples worth $32 million to 8 percent on couples worth more than $10 billion.