Sen. Elizabeth Warren (D-MA) has resuscitated her campaign proposal to levy additional income tax on “ultra-wealthy” Americans. Under her proposal, the government would charge two percent on assets above $50 million each year, increasing by a percentage point over $1 billion.
In our current divisive culture, it is no surprise to see a bill seeking to target one group for having more than others. Wealth distribution has been attempted throughout history, with tragic consequences for nations’ citizens and economies.
Proposal Punishes Success, At Expense of Civil Society
America was founded to take a different path, toward freedom and away from state control of the economy. That’s why our civil society is strong and vibrant. Americans join in free associations to address the causes they care about and, through charitable giving, strengthen our communities, create opportunities and support those in need.
Sen. Warren’s misguided wealth tax proposal would undermine this America. It assumes the income and assets of wealthy Americans belong first to the government, not to those who have earned and saved.
Removing up to $3 trillion from the hands of citizens to be used for public spending represents a sizable shift of assets from the private sector to government control. The actual figure is likely to be far lower, as those impacted will change their behaviors and sell assets to avoid the punitive tax. Regardless, during a time when the charitable sector needs more resources than ever, diverting potential funds into government coffers is counterproductive to meeting our social goals. The ultimate, unintended consequence of this will be less resources for charities across the country as U.S. economic output shrinks in response.
Charitable Assets Excluded; Threat Remains
Unlike the tax proposal Sen. Warren promoted during her campaign for the White House, she does not specifically tax charitable assets in the latest bill. However, the language leaves the Treasury Department significant leeway in how to value assets and her past proposals and her recent comments suggest she remains open to this.
Consider her comments when asked whether Congress should look into eliminating the tax deductions for “big philanthropy.”
I’m not sure I want to eliminate breaks for philanthropy. I want to start by saying: Taxes are not philanthropy.
We don’t ask American middle class families, “Could you just kindly, out of the goodness of your heart, put in some money so that we can have an army, so that we can pave the highways, so that we can regulate clean air and clean water and build a power grid?” No. We tax people. This is what it takes to keep the nation going.
Only we have so under-taxed those at the top that it’s had two consequences. One is that it’s part of the reason they’ve been able to build such enormous fortunes, because wealth itself for this top group hasn’t been taxed. But the second consequence is they then get to use it in ways they decide they want to use it. And, last I saw, there aren’t many billionaires making charitable contributions to enforce serious environmental regulations, to enforce serious anti-monopoly regulations, to put in place a well-funded enforcement agency to make certain that people aren’t getting cheated on financial products. No, they want to direct money in the ways they want to spend it. And that’s fine, but that doesn’t relieve them of one penny of their responsibility to make a fair contribution to what it takes to run this nation and to run it not just for the benefit of the billionaires but the benefit of the rest of America.
This response speaks volumes for what the senator says, and for the underlying message that the wealthy have an obligation to pay a “fair contribution” in taxes. Her undertone is it is not fair for individuals to direct their resources to charitable causes they see as priorities. Rather, the government must make the decision on how to best spend their assets. This argument that the government knows best is the real danger in any proposal such as a wealth tax.
However, we know Americans of all income levels give freely to support the charitable sector in the ways they believe are best for our country. In our time of national crisis, a strong civil society is crucial. Now is not the time to hamper that giving with the argument that private assets are best managed by the government rather than its citizens.