Senator Sanders Proposes a Tax on “Extreme” Wealth

September 25, 2019

On Tuesday, Presidential candidate and Senator Bernie Sanders (I-VT) released a wealth tax proposal which includes a progressive tax on household assets and income over $32 million (for married couples). Sander’s goal is to target “extreme wealth” and the tax would only be levied on the top 0.1 percent of American households annually.

Sanders’s wealth tax would begin with a 1 percent tax on net worth above $32 million (for a married couple), rising to 2 percent once net worth reaches $50 million. The tax continues to increase with income, so net worth between $250 and $500 million is taxed at 3 percent, $500 million to $1 billion at 4 percent, $1 to $2.5 billion at 5 percent, $2.5 to $5 billion at 6 percent, $5 to $10 billion at 7 percent, and all wealth above $10 billion at 8 percent. For non-married filers, the extreme wealth tax brackets would be halved, avoiding marriage penalties (e.g. $50 to $250 million for a married couple would be $25 to $125 million for a single filer).

Net Worth Extreme Wealth Tax Rate
$32-50 million 1%
$50-$250 million 2%
$250-$500 million 3%
$500 million-$1 billion 4%
$1-$2.5 billion 5%
$2.5-$5 billion 6%
$5 to $10 billion 7%
Above $10 billion 8%

The plan would also call for the IRS to assess the net worth of the wealthiest Americans annually in order to levy the tax. The extreme wealth tax would apply to all assets owned by the top 0.1 percent of filers each year, regardless of whether those filers sell or transfer them. For assets which are not easily appraised, the plan would allow the Treasury department to create their own system of average tax rates based on several “classes of assets” and appraise them “periodically” rather than annually.

Two economists associated with the campaign, Emmanuel Saez and Gabriel Zucman, estimate that the tax would raise $4.35 trillion over the next decade. However, this revenue estimate is likely much too optimistic. Sanders wants to help fund many of his priorities with this additional revenue. However, due to the design of the tax, specifically the high rates for billionaires, less revenue would be raised over time as taxpayers’ assets are taxed away.

The tax would be progressive and tax some currently untaxed capital income, but it would also increase the effective tax rate on saving. An 8 percent wealth tax would result in negative after-tax returns for most assets. The tax would likely lead to a decline in national saving, which would make the nation poorer as a whole.

Sanders is now the second major Democratic presidential candidate to propose a wealth tax. Elizabeth Warren previously proposed a wealth tax, but at lower rates.

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A tax bracket is the range of incomes taxed at given rates, which typically differ depending on filing status. In a progressive individual or corporate income tax system, rates rise as income increases. There are seven federal individual income tax brackets; the federal corporate income tax system is flat.

A wealth tax is imposed on an individual’s net wealth, or the market value of their total owned assets minus liabilities. A wealth tax can be narrowly or widely defined, and depending on the definition of wealth, the base for a wealth tax can vary.

A progressive tax is one where the average tax burden increases with income. High-income families pay a disproportionate share of the tax burden, while low- and middle-income taxpayers shoulder a relatively small tax burden.