“As the weeks went on, she began describing her proposed levy on the accumulated wealth of multimillionaires as a sort of property tax on “the diamonds, the yachts and the Rembrandts,” a mere 2 cents on the dollar for the richest of the rich. That got people’s attention. Now her crowds—lately numbering in the tens of thousands—chant “2 cents” back to her.”
This is really incredibly bad economics. Who is her economic adviser? He is sure to know better if he simply thinks through her proposal.
Mrs Warren’s wealth tax is not on luxury consumption goods. To do that, all investment/savings must be deductible (a la Irving Fisher) from current income to arrive at taxable income. Then we would have a progressive consumption tax that targets the redistribution of consumption leaving all investment tax-free so long as it is left in the circular flow of new wealth creation.
We already double tax all NEW investments—the primary source of new wealth creation—first as business profit, then again on any dividend distribution from that profit. Adding a wealth tax falls directly on existing capital in the form of plant, equipment and human capital. This capital stock would have to be dis-invested to pay the tax. THIS IS CONTRARY TO THE OBJECTIVES OF THE DEMOCRATIC PARTY. It is founded firmly on economic ignorance, and nowhere better illustrates a self destructive policy commitment. Mrs Warren’s wish is to tax the luxury goods of the rich but is manifestly incompetent in knowing how to do this.
Politically of course, it is a winner with her followers chanting in Trump-follower style, “2 cents, 2 cents.” It could give her a win, thereby preventing her from achieving what she advocates.