Conservatives hit back on 2020 wealth tax proposals

Conservative groups are hitting back on wealth tax proposals from progressive 2020 candidates like Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.), as polls show broad support for the taxes.

Sanders and Warren have made higher taxes on multimillionaires and billionaires a key part of their respective plans to tackle inequality, but right-leaning groups argue that a wealth tax would be harmful for the overall economy and hurt more people than just the ultra-rich.

Those groups are now making the case that once voters learn more about the potential consequences of wealth taxes, public support will erode.

“I think groups like ours and others are trying to sound the alarm that whatever the appeal [wealth taxes] have to people in certain subsets, they are likely unconstitutional, it’s an administrative disaster to figure out to implement, and it would have huge negative impacts not just on wealthy people,” said Andrew Moylan, executive vice president of the National Taxpayers Union Foundation (NTUF).

On Wednesday, NTUF put out a paper arguing wealth taxes could hurt entrepreneurs. A few weeks earlier, the group released a paper that said wealth taxes could have “severe unintended consequences” for private charitable foundations.

Other fiscally conservative groups are also releasing similar papers. The American Action Forum this month published an analysis that found that Warren and Sanders’s wealth tax proposals would reduce gross domestic product and private investment and cost workers more than $1 trillion in lost earnings over 10 years.

The Tax Foundation plans to come out with its analysis before February, said Karl Smith, the group’s vice president of federal tax and economic policy. He said the findings are likely to be similar to those of the American Action Forum study.

Club for Growth President David McIntosh, meanwhile, said his group plans to put out a compilation that highlights studies about problems with wealth taxes and the spending programs Democrats want to finance with the tax revenue.

Many of these groups routinely examine politicians’ tax plans, but wealth taxes have caught their attention in part because these types of proposals haven’t been seen in previous elections.

“These wealth-tax proposals are new,” said American Action Forum President Douglas Holtz-Eakin.

The groups also are preparing for the possibility that prospects for a wealth tax could increase if Sanders or Warren emerges as the front-runner in the dwindling field of Democratic presidential candidates. 

Smith, of the Tax Foundation, said his group “wanted to be ready for that possibility.” 

A Des Moines Register/CNN poll released this month showed Sanders with a narrow lead in Iowa, but within the margin of error. The state’s caucuses will be held Feb. 3.

Polls also show support for wealth taxes.

A Reuters/Ipsos poll conducted in December found that most adults, including 53 percent of Republicans, agreed that “the very rich should contribute an extra share of their total wealth each year to support public programs.” 

A New York Times/SurveyMonkey poll in November found broad support for a wealth tax along the lines of Warren’s proposal. The only group without majority support for a wealth tax was Republican men with college degrees.

But in a finding that could be encouraging to Republicans, a University of Michigan survey conducted late last year found an increase in the percentage of consumers who think higher taxes on the wealthy to reduce inequality would hurt the economy, compared to when the question was asked in early 2018. Still, more people thought that such tax increases would help the economy than hurt it.

Conservatives argue there will be less support for wealth-tax proposals once voters learn more about them.

McIntosh said he doesn’t think survey respondents fully understand “the magnitude of the economic harm” that wealth taxes could cause.

“Our goal will be to educate them,” he said.

Conservative groups aren’t the only ones that have warned of potential problems or negative consequences.

An analysis of Warren’s wealth-tax proposal from researchers with the Penn Wharton Budget Model found that her plan would reduce gross domestic product.

And several current and former 2020 Democratic presidential candidates have criticized wealth taxes, arguing they could be unconstitutional or difficult to administer and haven’t worked in other countries.

But the differences among Democrats on taxes are less stark than the difference between Democrats and Republicans.

Michael Linden, executive director of the Groundwork Collaborative, a progressive group focused on economic policy, noted that many Democratic candidates who don’t back wealth taxes have proposed other ways to raise taxes on the rich, from taxing investment gains annually to expanding the estate tax.

In addition to Warren and Sanders, billionaire Democratic presidential candidate Tom Steyer also supports a wealth tax.

Progressives take issue with conservatives’ arguments that wealth taxes will hurt the economy. They’re skeptical the taxes would lead to a large investment decline, and argue wealth taxes would finance investments in spending programs that would help the middle class and result in more economic growth. Warren plans to use revenue from her wealth tax for health and education-related priorities, and Sanders plans to put revenue from his toward health, child care and housing proposals.

The Warren and Sanders campaigns have also pushed back on the conservative criticisms.

“No number of ‘analyses’ by right-wing think tanks will change the fact that her wealth tax will produce trillions in revenue to fund middle-class investments, grow our economy, and provide families with more financial security,” Warren campaign spokeswoman Saloni Sharma said.

Sanders campaign spokesman Mike Casca said that the Vermont senator’s campaign is “happy to go to battle with anyone who defends a status quo where people work two and three jobs while the richest own more wealth than the bottom half of the American people.”

Other progressives say Republicans may be nervous about the popularity of Democrats’ proposals to tax the rich.

“This is really new, that people are really rallying and organizing around taxes,” said Tax March Executive Director Maura Quint, whose group is set to hold a conference next weekend in Kentucky with organizers wanting to fight for higher taxes on the wealthy. 

“I think that’s something that’s surprising even progressive tax policy experts,” she said.