Arguing that the wealth of billionaires has grown over the course of the pandemic, U.S. Sen. Elizabeth Warren on Monday introduced legislation in Congress to tax the extremely wealthy, pitching a plan that became a calling card of her campaign for president.
The Cambridge Democrat wants to impose a 2% annual tax on net worth over $50 million, including assets like stocks and property. The plan calls for an additional 1% tax to be added on all net worth above $1 billion.
"This is a wealth tax that has been needed for a long time," Warren said at a Capitol Hill press conference. "We need it to produce more revenue to create more opportunity in America, but it is a wealth tax that we particularly need because of the changes in this country under the pandemic."
The tax plan would generate an estimated $3 trillion over a decade beginning in 2023 and allow President Joe Biden to follow through with an agenda that includes investing in child and senior care, infrastructure and K-12 education, Warren said.
If successful, the tax reform would also land at roughly the same time many Democrats and progressive advocacy groups in Massachusetts are pushing to impose a state wealth tax of their own on annual household income over $1 million. Lawmakers on Beacon Hill could vote as soon as this spring to let voters decide in 2022 whether to add a 4% surtax on income over $1 million.
The tax change, which requires a constitutional amendment in Massachusetts, has been billed as a reform that could generate up to to $2 billion for education and transportation, though that Department of Revenue estimate has not been updated since 2015.
While critics of a state-based wealth tax have argued that it will encourage business owners to leave the state, Warren's plan has a 40% "exit tax" for anyone who renounces their citizenship to avoid paying.
During the campaign, business groups and other opponents also said Warren's plan would discourage investment and may not be constitutional, both points Warren refuted. Warren said the richest Americans will continue to see their wealth grow under her plan, and her office released papers by constitutional scholars defending its legality.
She noted the government already taxes estates.
"A two-cent wealth tax means they just don't grow it quite as fast, but that two cents is an enormous difference for the rest of America," Warren said.
Biden did not endorse Warren's wealth tax plan during the campaign, but has said that the wealthy and corporations should be paying more in taxes. Warren is pushing the legislation after she said billionaires saw their wealth increase 40% to $4.2 trillion over the course of the pandemic.
She said she believes "lawmakers will catch up to the overwhelming majority of Americans who are demanding more fairness, more change, and who believe it's time for a wealth tax."
Economists at the University of California Berkeley estimated that Warren's plan would apply to about 100,000 American families, and raise about $3 trillion over the next 10 years. The researchers said about $400 million would come from the 1% surtax on billionaires.
While it's unclear how many in Massachusetts would have to pay Warren's wealth tax, 13 people from Massachusetts made the Forbes 400 list of wealthiest Americans worth a total of $63.1 billion, and Americans for Tax Fairness counted 20 households worth more than $1 billion.
The wealthiest Bay Stater on the lists was Abigail Johnson, the CEO of Fidelity Investments worth an estimated $15 billion and ranked 34th overall.
The number of individuals and families in Massachusetts impacted by Warren's wealth tax would be far fewer than those who could find themselves paying more under the state-level "Fair Share Amendment," which the Department of Revenue estimated more than five years ago would apply to roughly 19,500 filers, or half of 1% of all tax returns.
Warren teamed up with Rep. Pramila Jayapal, of Washington, and Rep. Brendan Boyle of Pennsylvania to introduce the legislation, which was co-sponsored in the Senate by Sen. Edward Markey and six other Senate Democrats.
Warren was newly appointed to the Senate Finance Committee and Jayapal sits on the House Budget Committee. Boyle is a member of the House Ways and Means Committee, helmed by Springfield Democrat Rep. Richard Neal, whose office did not respond to a request for comment.
Warren said she didn't have a preference for how Democrats should try to pass her wealth tax proposal, but she reiterated her supporting for filibuster reform in the Senate, without which Minority Leader Mitch McConnell and Republicans could likely block the bill's progress.
"Every time the Republicans want to talk about cost, then we should to be talking about revenue and that is the wealth tax," Warren said. "They want to complain about what things cost. We're putting forward a way to pay."
The House last week passed a version of Biden's newest $1.9 trillion COVID-19 stimulus package, which now moves to the Senate where Democrats are seeking to use the budget reconciliation process to get the bill through with a simple majority.
The success of the stimulus bill would mean billions of dollars more in direct aid from the federal government for businesses and government in Massachusetts to help respond to COVID-19.
As state legislators also begin their annual budget hearing process this week, tax collections continue to outperform projections despite months of economic restrictions imposed by the state to mitigate the health risks of COVID-19 and lawmakers are proposing everything from legalized sports betting to raising the gas tax to generate additional revenue to invest in public transit, climate change mitigation and other priorities.