Warren, Vermont Sen. Bernie Sanders and other Democrats on Monday proposed a 2% annual tax on the net worth of U.S. households above $50 million that would add an additional 1% levy on households worth more than $1 billion.
Warren’s legislation would tax the net worth of the wealthiest Americans in the proposal aimed at reducing income inequality in the U.S. The measure is nearly identical to the wealth tax that Warren, D-Mass., introduced during her failed 2020 presidential campaign.
"A wealth tax is popular among voters on both sides for good reason: because they understand the system is rigged to benefit the wealthy and large corporations," Warren said in a statement. "As Congress develops additional plans to help our economy, the wealth tax should be at the top of the list to help pay for these plans because of the huge amounts of revenue it would generate."
Warren estimates the "Ultra-Millionaire Tax Act" would affect about 100,000 households in the U.S., or roughly 0.05% of the population, and would generate about $3 trillion in revenue over the next decade based on estimates from the University of California, Berkeley economists Emmanuel Saez and Gabriel Zucman.
Hassett, vice president and managing director of The Lindsey Group and distinguished visiting fellow at the Hoover Institution, slammed the measure on Tuesday, explaining the way to think about a wealth tax.
“Right now, if you put your money in treasuries you get say less than 2% a year income,” Hassett said. “If the wealth tax is 3% a year then that means that you’ve got 150% income tax on wealth. It’s a tax bigger than a 100% on the income from wealth.”
He noted that “there have been dozens of countries around the world that have tried it,” but “everybody stopped right away because once you tax wealth that much, people find ways to avoid it or to get their wealthy the heck out of dodge.”
He then explained that “if you want a progressive increase in income, you have a progressive consumption tax of some type, where you basically tax people when they buy stuff, if they buy more than 100,000 or 200,000 a year of stuff.”
“That’s what countries around the world do when they’re trying to close revenue gaps like this and do it progressively,” Hassett continued.
He acknowledged that there are a couple of countries that may still have a wealth tax, but stressed that “everybody else has found that it doesn’t raise revenue and it causes all sorts of invasion.”
Speaking with host Maria Bartiromo on Tuesday, Hassett also weighed in on the debate to increase the federal minimum wage arguing that it’s a “catastrophe waiting to happen.”
Hassett stressed that increasing the minimum wage to $15 would be a “devastating blow” to small businesses that have had an incredibly challenging year during the coronavirus pandemic and the related shutdowns.
President Biden and congressional Democrats have pushed to raise the minimum wage to $15 per hour over the next four years as part of a broader coronavirus relief package.
Democrats’ hopes of including the minimum wage increase in their $1.9 trillion coronavirus relief bill seemed all but dead Monday as the Senate prepared to debate its own version of the House-passed aid package.
Senate Budget Committee Chairman Bernie Sanders said he wanted Democrats to ignore the Senate parliamentarian’s ruling blocking the minimum wage increase.
While it seemed the idea did not have the support among Democrats or the White House needed to succeed, Sanders, the Senate’s lead sponsor of the hike to $15, said he would force a vote on an amendment restoring the minimum wage increase.
“If you look at percentages of small businesses that have had to close down because of COVID, it’s still the case that 34% of small businesses that were open last January are still basically closed for business right now,” Hassett noted on Tuesday.
“And so those guys, when they finally open up are thinking, ‘OK well I’m going to lose money now, but when I open up I’m going to make some profit finally and that’s why I’m going to keep treading water, I’m going to try to keep this business alive.’”
“and then if you tell them that all of a sudden their labor costs, which are 70% of costs for small businesses, are going to skyrocket because of a $15 minimum wage, my guess is a whole bunch of them give up right now,” he continued, calling the potential move “a devastating blow to all those small businesses.”
He added that he believes a minimum wage increase could lead to “a wave of bankruptcies.”
FOX Business’ Megan Henney and The Associated Press contributed to this report.