Last week Senator Elizabeth Warren of Massachusetts proposed a wealth tax on America’s 75,000 richest people. Not a higher income tax rate, but a tax on an individual’s fixed assets over $50 million – stuff like stocks, precious gems, and fancy baseball card collections. I said to myself, “What a cool idea!” but I could have sworn I’d heard it before. Wait a minute. I remember. That was my idea! In my November 18, 2015 blog post “Eat the Rich for Thanksgiving” https://www.markwinne.com/wp-admin/post.php?post=973&action=edit I said, “We need…a tax on capital itself, not just capital gains. The beauty of this approach is that a very small tax on capital, in the order of one percent of the assets held by the top ten percent… would yield about $400 billion annually for the public’s coffers. This isn’t even a financial haircut for the rich; think of it as a mere trimming of split ends.”
If truth be told, I was building off the ideas of Thomas Piketty whose economic analysis Capital in the 21st Century was the subject of my blog post. I used it to, among other things, imagine what the positive consequences of more public revenue would be for tens of millions of hungry Americans.
Politically, of course, Senator Warren couldn’t attribute this idea to a radical French economist like Piketty. It would sink faster than a batch of soggy freedom fries in a light cream sauce. But at least a shout out to me, a guy who earned a strong B-minus in the one college economics course he took would have been acceptable. Oh well…
To her credit, the Senator suggested that a portion of the $275 billion that her proposed wealth tax would raise annually (her lower revenue calculations relied on a more generous deduction for baseball card collections than mine did) could be used to pay down student debt. I love it! Fabulous! But wait, in an October 2016 blog post didn’t I rail against the need for college and university food banks https://www.markwinne.com/wp-admin/post.php?post=1018&action=edit that were caused in part by skyrocketing student debt?
Drawing on Piketty’s key point that tremendous wealth begets tremendous wealth, I compared Yale University’s $24 billion endowment to nearby Norwalk (Conn.) Community College’s $27 million endowment. At Yale, the nation’s best financial managers that money can buy produce an astounding annual fund yield of 14 percent. Norwalk’s endowment probably earns them free checking at the Downtown First and Last Trust. As of 2016, one in five Norwalk students reported being hungry at least once in the last 30 days, and only 33 percent could afford to go to school full time. Let’s hope that endowments the size of Yale’s and Harvard’s are included in Warren’s wealth tax.
Why tax wealth? Voila! As Piketty made clear, a conservative rate of return of 4 to 5 percent per year on even a modest amount of wealth can keep you on easy street. If I had a million dollars in stocks and bonds that I didn’t need to use, I’d earn $50,000 a year – the amount the average American working schmo makes from a full-time job – simply by propping my feet up on the porch railing, sipping margaritas, and watching the Santa Fe sunset.
No hard feelings, of course, Senator Warren. You already have my vote for President. And as we say in New Mexico, mi idea es tu idea. Or. as I’m sure Piketty would encore, mon idee est votre idee.