The coronavirus pandemic has led to many states – including Maryland having budget shortfalls and many academics and politicians say the solution is to impose a wealth tax on top income earners.
They point to the recent revelation that President Donald Trump only paid $750 in federal income taxes in 2017 as just another example of the superrich not paying their fair share of taxes and the need for legislative action to ensure that they do. Sen. Elizabeth Warren (D-Mass.) and Sen. Bernie Sanders (I-Vermont) both supported a wealth tax, but Democratic Presidential Nominee Joe Biden has not. Biden has supported raising corporate taxes on billionaires but not has endorsed either Warren or Sander’s tax plan.
A recent study by the Center on Budget and Policy Priorities recommends the imposition of a wealth tax to address racial and class disparities-both of which have been exacerbated by the pandemic. The study calls for increases in both income and capital gains taxes and the enactment and/or expansion of estate taxes. The study said the money generated from the taxes could be used to pay for increases in health and education spending and for cash assistance to struggling families.
But is hiking taxes on the rich the answer to addressing budget shortfalls?
“Even before COVID, the resounding question asked when we wanted to advance public education, provide equity to our HBCU’s (Historically Black Colleges and Universities), or lessen the wealth gap, has been how do we pay for it?” Sen. Jill Carter (D-Baltimore City) told MarylandReporter.com on Thursday.
Fred Lobbin, a retired nuclear engineer, called for implementing a federal net worth tax in an op-ed for MarylandReporter.com on Thursday. Under Lobbin’s proposal, all forms of the income tax would be replaced with a 3% annual tax on individuals with assets of $200,000 or more.
“Individuals owning assets worth $200,000 or more would complete an annual and relatively simple assets/liabilities statement in order to determine their net worth, a statement similar to what is typically required by lending institutions prior to obtaining a loan to buy a house, car, boat or another similar asset. A 3% tax would be paid on the amount of net worth in excess of the $200,000 exclusion. Individuals with a net worth valued at less than $200,000 (the large majority of the country) would have to certify this fact at tax time using a simple post-card-size tax return form.”
Lobbin’s “net worth tax proposal” and other types of wealth tax proposals were not even on the radar a decade ago, but now some states are taking a hard look at how to raise revenues to compensate for revenue declines.
Last month New Jersey lawmakers reached a deal to impose a 2% tax increase on income that exceeds $1 million. Similar proposals have been floated in New York and in several other states.
“A wealth tax would be a common-sense measure to help quell the economic disruption created by the pandemic,” Carter said. “Legislative leaders, as well as the governor, should support an increase on the wealthiest 1% and measures to offset special tax breaks for capital gains and millionaire heirs.”
Comptroller Peter Franchot disagreed, telling MarylandReporter.com that a wealth tax would cause many Marylanders to leave the state.
“We had an experience in the previous administration where we could really track…wealthy people leaving Maryland and going down to states that had lower taxes. That has been calmed down. That doesn’t exist right now.”
Franchot added: “Putting in a millionaires tax right now-I know its well intentioned-I don’t think it would necessarily create that much money. I think it’s the wrong direction right now for the state public budgets to seek to patch every hole with a new tax or a new fee…Right now it’s bad-bad timing to increase taxes and fees.”