As Democratic presidential candidate Elizabeth Warren fights criticism of her proposed wealth tax from some of the country’s most powerful business leaders, she must also contend with new research suggesting the plan would curb economic growth buoyed under President Trump.
The Massachusetts senator's wealth tax might reduce expansion by 0.2 of a percentage point annually over the course of 10 years, according to the University of Pennsylvania's Penn Wharton Budget Model.
As first reported by The New York Times, the assessment is based on Warren’s initial “ultra-millionaire tax” proposal that included a top tax rate of 3 percent. It also assumed the revenue would be used to pay down the national debt, which it estimates would spur growth, but is not what Warren has planned. Using those conditions, researchers expected average growth to slow to 1.3 percent from 1.5 percent.
Researchers predicted that if the tax were implemented, wealthy Americans would spend more money, while investing and saving less to avoid triggering the tax, the Times noted.
According to economists from the University of California Berkeley who helped write Warren's plan, the tax would raise $2.75 trillion over a decade. The Penn Wharton Model, however, suggests it would generate just half of that.
Warren fired back against the estimates in a tweet on Thursday, saying the model assumes she would be “sticking $3 trillion under a mattress.”
A fuller analysis of Warren’s plan will be released by the group next month.
The 2020 frontrunner has also recently floated raising the top rate to 6 percent to help fund her Medicare-for-all proposal, while battling pushback by business leaders from Microsoft co-founder Bill Gates to entrepreneur Mark Cuban and JPMorgan Chase CEO Jamie Dimon.
Gates, who is in favor of creating a more progressive tax structure, raised concerns that a wealth tax would discourage innovation and investment in the U.S.
“I’ve paid over $10 billion in taxes, I’ve paid more than anyone in taxes,” Gates said during a New York Times/Dealbook conference. “If I’d had to have paid $20 billion in taxes – fine. But when you say I should pay $100 billion, OK, I’m starting to do a little math about what I have left over.”
The founder of financial investment management firm Charles Schwab Corp. – Charles Schwab – called wealth taxes “wrong-directed in many ways” in a recent interview with Bloomberg. He told the outlet that tax-the-rich schemes don't take into account the philanthropy of many wealthy individuals.
Over the weekend, entrepreneur Mark Cuban laid into Warren’s Medicare-for-all plan, accusing her of misleading the public about a timeline for implementation. He also said a wealth tax would not be enough to cover the costs.