“I have a plan for that,” Senator Elizabeth Warren says. She has a tax for that, too.
The latest tally: 15 new or expanded revenue-generating measures that Warren says would raise more than $21 trillion over 10 years, an amount equal to a little less than half of the $46 trillion that the Congressional Budget Office estimates the federal government would already collect in taxes from 2020 through 2029. The wealthiest Americans and corporations would shoulder almost all of the tab.
The Massachusetts senator has built her campaign for the Democratic presidential nomination around the idea that the time has come for “those who have done really well in the last few decades to pay their fair share” so others don’t have to struggle as much to get by. She would use the trillions in new revenue to pay for an ambitious set of social programs.
But after carrying her into the top tier of candidates, Warren’s momentum has stalled amid pushback from moderate Democrats who worry that some of her proposals — especially Medicare for All, the largest and most costly by far — are too extreme and will alienate crucial middle-of-the-road and swing voters.
This is more than a disagreement over the best political strategy to deny President Trump a second term. It’s a tug-of-war for the soul of a Democratic Party split over just how far left it should tack to rein in what many voters see as out-of-control capitalism that has allowed the rich to get richer, the poor to get poorer, and the middle class to inexorably wither.
What is the fair “fair share” for one percenters and corporate America to pay? How much control over markets and business should the government wield?
Where Democrats land on these questions will have profound implications not only for the 2020 election, but for how the country charts its future economic course.
“I have a plan for that.”
The quip that became a campaign slogan captures Warren’s political persona: the distinct mix of dead-serious policy prescriptions and a self-deprecating nod to her ivory tower earnestness. She’s a dogmatic pragmatist, but also unafraid to aim high and with boldness.
Senator Bernie Sanders, who in many ways blazed the economic populist trail for Warren, is a self-proclaimed socialist who has long wanted to dismantle some core elements of capitalism and start anew. Warren, who labels herself a capitalist, wants to recalibrate the markets, through aggressive regulation and taxation.
Yet the two candidates have much in common, including a unified theory of everything: The US political and economic systems are rigged to keep wealth and power in the hands of the elite. Read through the 50-plus plans on Warren’s website and it’s clear that many are designed, primarily or as a secondary benefit, to put more money and influence in the hands of ordinary people.
Among Warren’s key advisers are two economists from the University of California, Berkeley, Emmanuel Saez and Gabriel Zucman, who have dug deeply into the issue of wealth and income inequality. She frequently highlights two troubling trends that emerge from their work.
First, the share of wealth held by the richest top 0.1 percent of American families, or 75,000 households, has risen nearly threefold to 20 percent from the late 1970s through 2016, while the share of the bottom 90 percent has dropped to 25 percent from 35 percent.
Second, that top 0.1 percent will pay an estimated 3.2 percent of their wealth in federal, state, and local taxes this year, while the bottom 99 percent are projected to owe 7.2 percent.
Warren’s objective is to moderate such inequities and fix the system that perpetuates them. To do so, she would roll back policies — adopted over more than 40 years, first by Republicans and later by centrist Democrats — that prioritize an unfettered marketplace and antipathy for social welfare, and have disproportionately helped the wealthy.
Instead, to a degree not seen since the mid-1960s, a Warren administration would, she says, aggressively intervene to shrink the wealth gap, limit the clout of big business and the rich, protect the little guy, and take on climate change.
Warren would use her tax hikes — and revenue from closing loopholes and ending subsidies — to pay for a host of spending initiatives aimed at shrinking the wealth gap: free universal health coverage and subsidized child care; student debt relief and elimination of public college tuitions; money for K-12 education and affordable housing; and more generous Social Security benefits.
First, Warren would repeal two-thirds of the $1.5 trillion in tax cuts that mark the biggest legislative success of Trump’s administration. While individual rates fell, the changes — including a reduction in the corporate rate to 21 percent from 35 percent, and the immediate deduction of capital investments — mostly benefited big companies and the rich.
Her most-discussed revenue generator is a wealth tax, which Warren estimates would bring in $3.75 trillion over a decade. Households with net assets of $50 million to $1 billion would pay a 2 percent annual levy on their wealth; amounts above $1 billion would be taxed at 6 percent.
Warren, while noting that the rich have many strategies to reduce income taxes and are sure to resist her proposed levy, says the surcharge on assets would not only pay for essential programs, but also chip away — year by year, generation after generation — at a wealth gap that is only growing wider and more pernicious.
“While we must make income taxes more progressive, that alone won’t straighten out our slanted tax code or our lopsided economy,” she writes in her wealth tax plan.
Critics of the wealth tax, including some Democrats, raise concerns not only about fairness, but also its effectiveness and potential to hurt the economy. The Organisation for Economic Co-operation and Development, an international policy research group whose 36 member nations include the United States, studied the issue and ticked off a list of possible negative outcomes: a reduction in saving and investment, disincentives for entrepreneurship, a rise in tax avoidance strategies, and a thicket of problems around how to accurately value the assets to be taxed.
Larry Summers, the former president of Harvard University who served as Treasury secretary under Bill Clinton, is a high-profile opponent of wealth taxes. In a blog post, Summers and Natasha Sarin, an assistant law professor at the University of Pennsylvania, wrote that Warren’s plan would likely not raise as much money as the candidate estimates, and would not dilute the economic and political clout of the richest Americans as she intends.
“Investing substantial political capital into a tax model that is untried in the United States and has failed internationally strikes us as unwise,” they said.
Wealth taxes were once popular in Europe, with 12 countries using some form of the levy in 1990. Today, Norway, Spain, and Switzerland are the only European governments that still collect them.
Beyond the wealth tax, Warren also wants to change how the rich pay capital gains taxes, bringing in $2 trillion over 10 years to help fund Medicare for All, and expand the federal tax on inherited wealth to fund most of a $500 billion affordable housing plan,
And then there is Social Security, known as the third rail of American politics because efforts to touch it are dangerous. Warren proposes to increase benefits for all current and future recipients by $2,400 a year, and change rules to boost benefits for lower-income families, women, people with disabilities, public-sector workers, and people of color.
Again, the money to do this would come from the affluent — the top 1.5 million families, according to her Social Security plan. The campaign hasn’t said how much money the new Social Security taxes would bring in, but points to an analysis by Moody’s that estimates Warren’s changes would reduce the federal deficit by more than $1 trillion over 10 years and extend the solvency of the Social Security trust fund by 20 years.
For Warren, leveling the playing field also means protecting American workers and reversing the agglomeration of power held by the country’s biggest companies.
When the senator talks about corporate America, manufacturing, and foreign trade, she hits some of the same protectionist notes as the president she loathes. US companies must stop sending jobs overseas; the government needs to pursue trade deals that help, not hurt, American workers; the economy isn’t expanding as robustly as it could be.
“If we want faster growth, stronger American industry, and more good American jobs, then our government should do what other leading nations do and act aggressively to achieve those goals instead of catering to the financial interests of companies with no particular allegiance to America,” she writes in her “economic patriotism” agenda.
Warren peppers many of her plans with proposals to boost jobs and wages. She would require directors of companies with more than $1 billion in revenue to weigh the interests of all corporate stakeholders — employees, vendors, local communities — and not just shareholders when making decisions.
And in another Trumpian echo, she would push to manage the value of the US dollar — that is, lower it relative to other currencies — to support US manufacturers by making their products cheaper for foreign buyers.
She also has a long list of measures designed to curb the power of giant companies, promote competition, and protect consumers.
Amazon, Facebook, and Google would be broken up into smaller companies to reduce their control of key markets and consumers’ personal data. The nation’s largest banks would be more closely regulated — and “too-big-too-fail” institutions would be downsized — to prevent abusive practices and another financial crisis. Antitrust laws would be strictly enforced, and past consolidations in technology, agribusiness, and pharmaceuticals would be revisited and potentially undone. Drug companies would be required to negotiate lower prices.
In a move that would disrupt the higher education sector in Massachusetts and across the country, Warren has proposed forgiving student loan debt and making tuition at public colleges and universities free. The idea is to make a good education accessible to more students, and redirect money now going to tuitions and paying down debt into the economy.
But college leaders worry the initiative could swamp already resource-strained public institutions while further limiting the appeal of private liberal arts schools.
Of course, the biggest and most sweeping of Warren’s proposals is for a government-run health insurance system. Through the early stages of her campaign she was not eager to endorse Medicare for All, which is closely associated with Bernie Sanders, and even less eager to explain how she would fund it.
But after being pressed by rivals and television debate moderators, Warren recently spelled out her financing plan. She would use money from a variety of her new taxes and rely on wringing out significant costs from the health care system. Most important, she would require employers to kick in $8.8 trillion, essentially redirecting the private insurance premiums they pay now. Warren says employers would end up paying $200 billion less than they do under the current system.
Medicare for All has emerged as the most divisive issue among candidates and Democrat voters. The prospect of being forced into a government plan scares many Americans who have good coverage through their jobs. The “public option” — making Medicare for All a choice under the Affordable Care Act rather than a mandate — is favored by moderates such as former vice president Joe Biden and Minnesota Senator Amy Klobuchar.
Moreover, a single-payer system would not only put many private insurers and their employees out of business, it is likely to squeeze many doctors, hospitals, and other service providers as the government leverages its buying power to drive down costs.
In Massachusetts, hospitals such as Massachusetts General and Beth Israel Deaconess are large employers. Despite the state’s strong liberal bent, trade groups representing health care providers and insurers have said they oppose Medicare for All.
Warren pitches her environmental agenda as a jobs-and-stimulus package — a 21st-century version of Eisenhower’s interstate highway program or JFK’s moon shot.
In September, she got behind Washington Governor Jay Inslee’s plan to convert US electricity generation, transportation, and homes and commercial buildings to 100 percent clean energy, and laid out a 10-year, $3 trillion vision on how to get there — with corporations paying the bill.
The main items: $1.5 trillion for purchases of US-made clean energy products for use by federal, state, and local governments, and for sale overseas; $400 billion for clean energy research; and $100 billion to support exports of US-made clean energy technology.
Warren says these initiatives would create millions of good-paying jobs and make the United States the leader in clean tech. They would be financed in part by a new 7 percent tax on corporate profits exceeding $100 million.
There is a second big piece to Warren’s climate mitigation strategy: $1 trillion to accelerate the shift to green building products, zero emission vehicles, and clean and renewable electricity. The costs of this initiative would be covered by repealing the GOP corporate tax cuts of 2017.
While Warren pairs her trillion-dollar spending plans with trillions of dollars in new taxes, at some point it makes little sense to try to balance her campaign-promise budget.
Projections for government spending and revenue are notoriously hard to get right. How much will it really cost to provide a no-tuition public college education for anyone who wants one? How much money will the government raise from a wealth tax, which is a daunting undertaking that has stymied other countries? Can Warren really drive down costs in health care?
Then there is political reality. Even if Warren becomes president, many of her proposals would require the approval of Congress and, in the case of the wealth tax, maybe even a Supreme Court ruling that it is constitutional.
Primary voters in both parties lean toward the extremes, which is an advantage for Warren. But it could be a problem in the general election, where appeal to Democratic and GOP moderates, independents, and disillusioned Republicans in swing states will be essential.
Progressives young and old say that Trump can be dislodged only with a promise of bold change. They argue that requiring the wealthiest people to shoulder the cost of bread-and-butter programs like universal child care and student-loan forgiveness will appeal to people in both parties who are struggling to get by.
“Is she too radical for the party?” Michael Dukakis, the party’s 1988 candidate, said in an interview. “No, this is basic Democratic stuff.”
Dukakis said that when he ran against George H.W. Bush, wealth inequality was nowhere near as severe as it is now.
After years of cutting taxes for the rich, he said, “We shouldn’t be surprised that there is an enormous amount of resentment out there, including among Trump voters.”