Lawmakers should make an in-depth study on the proposed wealth tax proposed by Sen. Elizabeth Warren first before passing this legislation, former economic adviser Larry Summers said in an interview.
The former Secretary of the Treasury and director of the National Economic Council said he would investigate changes on economic policies instead of considering new taxation laws.
Sen. Warren, a Democrat lawmaker from Massachusetts, is expecting to raise approximately $2.75 trillion within ten years by imposing a 2% tax every year on families with assets over $50 million, which constitutes 1% of the US population.
Summers said the Congress should research on the reason most European countries with more progressive taxation and had wealth taxes have decided to eliminate them over the last 15 to 20 years. He added that none of these economies obtained the revenue Sen. Warren is looking to receive.
The former Harvard president and economics professor said he would rather tackle closing shelters, broadening the economic base, stepping up compliance, and fixing the loophole in estate tax than taxing the ultra-rich.
Earlier, New York Rep. Alexandria Ocasio-Cortez, another Democrat, move to impose a 70% marginal tax rate on income above $10 million.
“Tax Their Consumption, Not Wealth”
Another economist suggested that taxing the ultra-rich by their purchases instead of their wealth. In his article on The Hill, Lawrence Kotlikoff, William Warren Fairfield Professor at Boston University proposed to levy the consumption of the rich through a progressive consumption tax. This law will tax spending above $100,000 at variable rates that increase from zero to 30 percent. To ensure the rich cannot evade their consumption should be taxed on a cash-flow basis.