Testimony: Senate Budget Committee Hearing on the Progressivity of the U.S. Tax Code

Graphic:

Excerpt:

In case you are thinking, “Well, the rich make more, they should pay more,” the top 1 percent of taxpayers account for 20 percent of all income (AGI). So, their 40 percent share of income taxes is twice their share of the nation’s income.  

Similarly, in 2018, the top 0.1 percent of taxpayers paid $311 billion in income taxes. That amounted to 20 percent of all income taxes paid, the highest level since 2001, as far back as the IRS data allows us to measure. The top 0.1 percent of taxpayers in 2018 paid a greater share of the income tax burden than the bottom 75 percent of taxpayers combined.

Author(s): Scott A. Hodge

Publication Date: 25 March 2021

Publication Site: Tax Foundation

Warren’s Wealth Tax Enriches Foreign Billionaires

Link: https://www.wsj.com/articles/warrens-wealth-tax-enriches-foreign-billionaires-11615227317

Excerpt:

According to estimates conducted for Ms. Warren by University of California-Berkeley economists Emmanuel Saez and Gabriel Zucman, only about 100,000 families, or “less than 1 out of 1,000,” would pay the tax, which they estimate would raise “around $3 trillion over the ten-year budget window 2023-2032, of which $0.4 trillion would come from the billionaire 1% surtax.”

Yet Tax Foundation economists discovered a surprising consequence when we ran the proposal through our general equilibrium tax model last year. The model showed that despite being a massive tax, raising nearly $300 billion a year, the tax had only a modest impact on gross domestic product. How can that be?

The model predicted that wealthy U.S. citizens would sell their assets at fire-sale prices to pay the tax. Because the U.S. is an open economy, many of these assets would be bought by foreign investors at the discounted prices. Thus, while a wealth tax wouldn’t shrink the U.S. economy much, it would change who owns U.S. assets. What Jeff Bezos, Warren Buffett and Mark Zuckerberg sell, Jack Ma, Carlos Slim and the sultan of Brunei might buy — and they’d be exempt from the U.S. wealth tax.

Author(s): Scott A. Hodge

Publication Date: 8 March 2021

Publication Site: Wall Street Journal