Sen. Bernie Sanders, pandering to the Vermont AFL-CIO annual convention on Saturday, used the opportunity to trot out the old socialist vote-getting scam of a “wealth tax.” As reported by the Washington Times, “Sanders, a self-described socialist, called for a progressive estate tax on multi-millionaires and billionaires.”
By calling for a wealth tax, Sanders completely ignores the fact that never in this planet’s history have such taxes had the desired effect.
Well in actuality, wealth taxes have often had the effect desired by those calling for such a tax. But that effect is not the effect that proponents claim. So let me correct the last part of the statement in the previous paragraph.
Wealth taxes have never increased overall tax revenue. But they have had the effect intended by the person calling for them. That’s because the real, un-stated intent was not to increase tax revenue, as they claim, but rather, to get the votes of those too naive to know that wealth taxes just drive wealth to other nations and thus increase the tax load on the poor and middle class, who remain.
Wealth taxes have been tried in many forms, over the years, and not only have they all failed to increase tax revenue, but overall tax revenue ended up being down significantly, as a direct result of a wealth tax.
In George W. Bush’s infamous betrayal of his “No new taxes” oath, was a 10% Luxury Tax (a type of wealth tax). Proponents of the tax “claimed” that it would raise tax revenue. On October 26, 1990 the Joint Committee on Taxation issued a report titled, “Budget Reconciliation (H.R. 5835) – Revenue Provisions as Reported by the Conferees”, in which the the committee projected that the Luxury Tax provisions of the budget bill would generate $25 million in 1991 (found at the bottom of page 2 in the linked report). In 1992, we learned that it had, in fact, only generated $16.6 million in 1991. Oops!
But that’s not the worst of it. As a direct result of the luxury tax, more than 9,000 jobs in the USA were lost in the yacht, aircraft, and jewelry industries. Those job losses cost the government $24.2 million in unemployment benefits and lost income tax revenue in 1991. So the net effect of the luxury tax was a $7.6 million in lost revenue in 1991, alone.
The luxury tax was repealed in 1993. But by that time it was too late. The formerly booming U.S. yacht industry, which represented 7,600 of those lost jobs, had already moved offshore and that industry has remained largely offshore since that time.
Then look at the French wealth tax. In a paper titled, “The Economic Consequences of the French Wealth Tax“, the renowned French professor of economics and finance, Eric Pichet states, “The ISF (‘Solidarity Wealth Tax,’ the French wealth tax) causes an annual fiscal shortfall of €7 billion, or about twice what it yields; The ISF wealth tax has probably reduced GDP growth by 0.2% per annum, or around 3.5 billion (roughly the same as it yields); In an open world, the ISF wealth tax impoverishes France, shifting the tax burden from wealthy taxpayers leaving the country onto other taxpayers.”
These are just two recent examples of wealth tax failures. In fact, every attempt at employing a wealth tax has not only failed to increase tax revenue, but has significantly reduced overall gross revenue, largely due to the flight of wealthy taxpayers, to more wealth-friendly jurisdictions.
Some people reading this may be thinking, “That can’t happen here. The luxury tax failure was a fluke. This is the USA. Where would the wealthy go?” But the evidence shows that it’s already happening here. Since Barack Obama assumed office and embarked on his “Soak the Rich” agenda, the rate of wealthy U.S. citizens who formally renounce their citizenship each year, as recorded in the Federal Register, has increased by 1300% and renunciations this year indicate that it will be even higher in 2014.
In the entire history of the planet, wealth taxes and other attacks on success have never resulted in increasing tax revenue.
But wealth taxes almost always achieve what its proponents secretly intend. It convinces naive and uninformed voters to vote for the person calling for a wealth tax.
In all likelihood, Sen. Sanders knows full well that a wealth tax will significantly hurt middle and lower class working people. But he also knows that if he plays it up long enough, it will convince many naive and unsophisticated voters to vote for him. In that case, the wealth tax will do exactly what he intends – get him votes at the expense of poor and middle class voters.
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