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“In 1995, Edward Wolff, an economist at N.Y.U., published a short book called “Top Heavy,” which detailed the increasingly alarming concentration of wealth in the United States, and warned of the threat that it posed to American democracy, as the ultra-rich sought to exercise more political power. At the time, the richest one per cent of families controlled about forty per cent of all household wealth—defined as stocks, bonds, other financial assets, equity in private businesses, trusts, real estate, and bank deposits—while much of the population had virtually no wealth at all once debts and mortgages were taken into account. To address this disparity, Wolff called for the introduction of an annual tax on wealth. Aware that this might be considered a radical idea, he kept his proposed tax rates at pretty low levels. Under his plan, households with a net worth of a hundred thousand dollars would pay five cents in tax on every hundred dollars of their wealth; the rate would rise to thirty cents per hundred dollars for households worth a million dollars or more. (Back then, about three per cent of U.S. households fell into the latter bracket.)
Despite the modest scale of Wolff’s proposal, it didn’t get much traction in the policy world. Prior to publishing the book, he did have a lunch meeting with Bill Bradley, the Democratic senator from New Jersey, where they discussed the idea, but that was as far as it went. “He sounded enthusiastic at the lunch, but when push came to shove he walked away,” Wolff recalled when I spoke with him earlier this week. “He thought that politically it was dynamite.”
Twenty-five years later, how have things changed? Last week, Senator Elizabeth Warren, the Democratic Presidential candidate, put forward a wealth tax that would be much bigger than the one Wolff proposed but also much more narrowly focussed. Under Warren’s plan, the tax rate on wealth would be two per cent, but it would only apply to American households worth at least fifty million dollars, of which there are fewer than eighty thousand. Fortunes of a billion dollars or more would be taxed at three per cent—ten times the top rate in Wolff’s plan. Not everyone is thrilled about Warren’s proposal, of course. During a visit to New Hampshire, Mike Bloomberg, who is considering running for President in 2020, as a Democrat, claimed that Warren’s proposal was unconstitutional and brought up Venezuela. Howard Schultz, the former Starbucks C.E.O. who is thinking of entering the Presidential race as an Independent, called the Warren plan “ridiculous.” On Capitol Hill, meanwhile, Mitch McConnell and two other Republican senators said that they would introduce a bill to repeal the federal estate tax, a type of wealth tax that has already been so weakened that it now hits fewer than two thousand families a year. So much for billionaires and Republicans.”
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