A wealth tax harms progress

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A wealth tax harms progress

Grace Walraven | @grace_walraven, Staff Columnist

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Many of the Democratic presidential candidates have proposed policies directly taxing the wealthy. This has proven to be counterproductive and has had negative economic effects in Europe. Nine of the original twelve countries have since repealed their wealth specific taxes. Negative ramifications of a wealth tax include: avoidance, evasion, capital flight, and an increased amount of exemptions. Implementation of these policies will see the fall of America as an economic power which will damage not just ourselves, but the global economy. 

The basis for the Warren-Style wealth tax is on fairness of wealth distribution and income. Senator Bernie Sanders, in a similar line of thinking, would like to address the wealthy not paying their fair share of taxes. I would like to note that in 2016, according to The Tax Foundation: the bottom 50% of taxpayers ($40,078 and below) paid on average 3.7% in taxes; the top 1% of taxpayers(above $480,804) paid on average 26.9% in taxes. The top 1% of taxpayers paid $538 billion, or 37.3% of all income taxes while the bottom 90% of taxpayers paid $440 billion, or 30.5% of all income taxes. 

With an added wealth tax, those who are of a slightly lower income than that of the 1% may choose not to increase their capital in order to avoid higher taxes. Those who the taxes would be imposed on may choose to leave the United States, causing not only monetary but also American intellectual capital flight as well. We will end up stifling ourselves; much like countries in Europe with their own Warren-style wealth tax. 

What Sen. Sanders suggests–canceling student and medical debt–is something that can and will bankrupt the United States. Somebody has to pay those bills, or there will be a loss of jobs and businesses due to their inability to absorb the costs of the bills that were canceled. Assuming the government decides to pay for these bills, this debt will be paid by taxing a larger portion of the country. In order to pay the initial bills, the United States may have to take a loan from another country to pay for the trillions of dollars of debt it has taken on. It is not fiscally feasible to “cancel” debt. It is not possible without the collapse and reconstruction of our economic current system. Now during a critical period in global politics, the United States in a weakened state may face challengers in shaping the international system that could lead to war.

Capitalism is based on the ability to innovate and grow. With taxes dissuading progress, we will move towards a system based where all is equal and the desire to move forward does not exist. Capitalism can be stifling in its own right when creating a wealth gap, but it also allows people to create competition, in turn leading to better goods and services. It also gives the consumer more freedom to choose the products they desire. It gives the people what they want.