The Daily Update - Tax the Rich and Watch Them Run

Bernie Sanders has announced radical plans to forgive 45 million Americans of their outstanding student debt, around USD1.6tln, by introducing new taxes on Wall Street. The legislation, dubbed ‘The College for All Act’ will release all 45 million Americans that have outstanding student debt, as well as making two and four-year public colleges and universities tuition and debt-free. Apprenticeship and trade schools would also be free. In an interview, Sanders told the Washington Post ‘This is truly a revolutionary proposal’ adding ‘In a generation hard hit by the Wall Street crash of 2008, it forgives all student debt and ends the absurdity of sentencing an entire generation to a lifetime of debt for the ‘crime’ of getting a college education’.

Of course the idea is not a new one, and neither is the idea of taxing Wall Street, however with the upcoming Presidential elections next year leading Democratic candidates are calling for a new range of taxes, not only on Wall Street, but also those in the ‘extreme wealth’ bracket. They believe wealth taxes would help fund everything from universal childcare, improvements in infrastructure, tax relief for low-income families and clean energy, not forgetting the aforementioned student loan debt relief.

Indeed close to 20 US billionaires have signed a letter calling on any new government to tax extreme wealth, stating ‘America has a moral, ethical and economic responsibility to tax our wealth more’ adding ‘Instituting a wealth tax is in the interest of our republic’. It is estimated the tax could generate nearly $3tn in revenue over 10 years.

The letter begins ‘We are writing to call on all candidates for President, whether they are Republicans or Democrats, to support a moderate wealth tax on the fortunes of the richest 1/10 of the richest 1% of Americans. The next dollar of new tax revenue would come from the most financially fortunate, not from middle-income and lower-income Americans’ and goes on to say ‘Polls show that a moderate tax on the wealthiest Americans enjoys the support of a majority of Americans - Republicans, Independents, and Democrats. We hope that candidates for President will also recognize the force of the idea and join with most Americans in supporting it.

However, some Democratic candidates want to go a lot further, Senator Elizabeth Warren believes in a policy of ‘Ultra-Millionaire Tax’ where there should be a 2% tax on assets of USD50m or more, plus an extra 1% over USD1bln, this should include everything from financial assets to art, cars and yachts. So if Warren’s idea was to come to fruition the US government is going to have to be very good at valuing art, yachts and vintage cars. The poison pill in Warren's plan includes an "exit tax," which would confiscate 40 percent of all a person's wealth over $50 million if they renounce their citizenship.

Although this sounds like a great idea in principle it has been tried before. France for example where 42,000 millionaires looked at leaving France between 2000 and 2012, at which point French President Emmanuel Macron killed the idea.

In the early ’90s, 12 countries in Europe had a wealth tax, today there are only 3. According to the OECD, there are many reasons why wealth taxes fail, not least because they are hardest on those that are asset rich but cash poor, they distort investment decisions and will indeed push the ultra-rich to move countries, and in the grand scheme of things, it has never raised much money.

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