Democrats reached a consensus this week on an apparent area of commonality: the need to eat the wealthy. According to Treasury Secretary Janet Yellen, “Senator Wyden and the Senate Finance Committee … would impose a tax on unrealized gains on liquid assets held by extremely wealthy individuals, billionaires.” While Yellen refused to call this a “wealth tax,” House Speaker Nancy Pelosi had no such qualms: “We probably will have a wealth tax,” she said.
It has long been a topic of conversation for Marxist-leaning Democrats such as Sen. Elizabeth Warren. She famously suggested a 2% wealth and income tax on the assets of families with assets exceeding $50 million, and a 6% wealth tax on those assets that exceed $1 billion. Adam Jentleson was an Elated Warren fan. The Washington Post, “Biden’s agenda was about to fall apart, but Warren had a plan for that.”
Then, what are wealth taxes? Unrealized wealth is taxed, which can lead to the destruction of value. Let’s say you are an entrepreneur who has created a company valued at $1 billion. Let’s say you built this business in five years. You earn a salary of $5,000,000 per year, after paying taxes and expenses. Your assets would amount to $25 million. Warren’s proposal would tax $950 million worth of unrealized assets at 2%. This would leave you liable for $19million in tax annually. Your stock would be worthless, and you’d have to sell it. This could cause a decline in its value and threaten the growth of your business.
There have been many countries that have tried wealth taxes, but they fail every time. While 42,000 millionaires escaped France’s wealth tax when it was created, President Emmanuel Macron ended the French version. Since 1990, 9 of 12 European countries which had wealth taxes have followed Macron’s footsteps and abolished their wealth taxes.
What’s the point in a wealth tax that will ultimately fail?
What matters is what punishment. Warren and Biden are trying to tax money that doesn’t exist yet, as the creators of those dollars deserve punishment. Biden blundering that he isn’t a capitalist, but only wants to reward earners — it’s actually a lie. Americans certainly have their fair share of earnings: The top 1% earn roughly 40% in income taxes, while only 21% earn the same income. After income transfers from the government, the highest income earners pay almost all the net taxes in America. This isn’t about a “fair share.” It’s about disincentivizing wealth creation, demonizing it, treating it as a mark of sin.
We have accepted such moral and economic idiocy. When we speak of the wealthy as the “privileged,” we betray our own unwillingness to speak the obvious: High-income earners provide more and better goods and services to people than lower-income earners. This is how their income is so high. The income they earn is due to consensual trades that result in voluntary transactions. Innovation and risk-taking must be rewarded in order for them to take place; to then attribute success to “privilege” or “luck” is to pretend that a free-market system is some sort of lottery. This isn’t the case. We destroy the economic system that generated our wealth and those who made it work by deciding that government benefits are somehow better and more moral than taking risks that lead to economic success.
That’s what is important. It’s not enough to have a modest tax on the upper crust. The United States originally had a 1% income tax on the bottom bracket. It was then 7% on the $500,000 and above. The top marginal income tax rate today is 37%. Income above $86,000 gets taxed at 24%. The agenda is clear, and it’s not just for the highest earners. There are no income restrictions when success is punished.
Ben Shapiro, 37, is a graduate of UCLA and Harvard Law School, host of “The Ben Shapiro Show,” and editor-in-chief of DailyWire.com. He is the author of the New York Times bestsellers “How To Destroy America In Three Easy Steps,” “The Right Side Of History,” and “Bullies.”
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