Democrats’ Plans to Tax Wealth Would Reshape U.S. Economy

The tax proposed by Ms. Warren would apply to households worth over $50 million. She would impose a 2 percent tax on net worth above $50 million, and a 3 percent tax on net worth above $1 billion.

The plan from Mr. Sanders would apply to a larger number of households, and it would be particularly aggressive on billionaires. His tax would start out at 1 percent on net worth from $32 million to $50 million, and it would top out at 8 percent on net worth over $10 billion.

Emmanuel Saez and Gabriel Zucman, the two University of California, Berkeley, economists who helped Ms. Warren and Mr. Sanders develop their plans, project that Ms. Warren’s proposal would hit about 70,000 households and generate $2.6 trillion in revenue for the federal government over a decade. They project that Mr. Sanders’s proposal would apply to 180,000 households and raise $4.35 trillion over 10 years.

Mr. Zucman said in an interview that he believes a wealth tax would have a modest but positive impact on growth. By reducing the power of the wealthiest, he argued, it would make markets more competitive and spur innovation.

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But redirecting such vast sums could have unintended effects on the United States economy that go beyond promulgating economic fairness. While Ms. Warren ticks off the social programs that can be funded if the richest Americans pay just 2 cents on every dollar they have above $50 million — a number that is unimaginable to most Americans — skeptics warn of economic stagnation, depressed business confidence and a legal battle that would go to the Supreme Court.

At a conference sponsored by the Brookings Institution in September, N. Gregory Mankiw, a Harvard economist, debated Mr. Saez and Mr. Zucman about the merits of taxing wealth. Mr. Mankiw, the former head of President George W. Bush’s Council of Economic Advisers, offered a searing critique, arguing that a wealth tax would skew incentives that could alter when the superrich make investments, how they give to charity and even potentially spur a wave of divorces for tax purposes. He also noted that billionaires, with their legions of lawyers and accountants, have proven to be experts at gaming the system to avoid even the most onerous taxes.

“On the one hand it’s a bad policy, and then the other thing is it’s a feckless policy,” Mr. Mankiw said.

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