Here's Why Warren's Wealth Tax Won't Work

Chair of the Council of Economic Advisers Christina Romer and Congressional Oversight Panel Chair Elizabeth Warren speak at the Women in Finance Symposium, March 29, 2010.

Elizabeth Warren has a plan to pay for all her plans; take wealthy Americans’ money. The problem is, other countries have tried just that, and it didn’t work. The rich and ultra-rich can move anywhere in the world and hide their wealth there. That’s exactly what they have done in other countries that tried to pin them down and take their wealth.

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Not to mention how difficult wealth taxes are for family farmers, whose wealth is tied up in their land. They are forced to sell parcels each year in order to fund the taxation. Pretty soon, there’s no farm left! And certainly no wealth.

At Mises.org, Germinal G. Van explains the problem with Elizabeth Warren’s wealth-tax plan, writing:

The second consequence will be a great decrease in productivity for the economy overall. Indeed, those who already own large amounts of assets often own those assets because they have managed to put them to good use expanding the economy and increasing employment. The wealth tax, meanwhile, is built on the premise that government agents can convert that wealth into cash payments, and that the government knows better how to distribute it.

Moreover, were Warren’s plan to be enacted, many of those subject to the tax may leave the country. This has already been shown to be the case in Europe, where, accoriding to NPR:

In 1990, twelve countries in Europe had a wealth tax. Today, there are only three: Norway, Spain, and Switzerland. According to reports by the OECD and others, there were some clear themes with the policy: it was expensive to administer, it was hard on people with lots of assets but little cash, it distorted saving and investment decisions, it pushed the rich and their money out of the taxing countries—and, perhaps worst of all, it didn’t raise much revenue.

In France alone, the “wealth tax contributed to the exodus of an estimated 42,000 millionaires between 2000 and 2012, among other problems.”

The Warren wealth tax plan may confiscate the material wealth of wealthy persons and families. But those same people can take their know-how and move elsewhere. The impact on American productivity would not be positive.

E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.