Even Cory Booker Doesn’t like Elizabeth Warren’s Wealth Tax

Key point: Booker still wants to tax the rich, but in a different way.

In last night’s Democratic presidential debate Senator Cory Booker (D-NJ) went after Senator Elizabeth Warren’s (D-MA) wealth tax proposal. He contended, “But the tax the way we’re putting it forward right now, the wealth tax, I’m sorry, it’s cumbersome. It’s been tried by other nations. It’s hard to evaluate. We can get the same amount of revenue through just taxation.” Instead, Booker prefers other methods to tax the wealthy. One of his proposals, mark-to-market taxation of capital gains, isn’t all that different than a wealth tax in some respects.

Cory Booker proposes to increase taxes on the wealthy by increasing the tax rate on capital gains to be equal to ordinary income (from 20 percent to 39.6 percent) and move to what’s called a “mark-to-market,” or an accrual based regime. Under this system, capital gains (the profit earned by selling an asset) would no longer be taxed at the time of sale. Rather, capital gains would be taxed every single year as it changes value. This change would raise taxes on the wealthy by eliminating deferral and taxing some capital gains that completely escape taxation due to the ability to step up basis at death.

A wealth tax, in contrast, is an annual tax on the net worth of a taxpayer. A few Democratic presidential candidates have proposed this, Elizabeth Warren being the most prominent. Under her proposal, high net worth individuals would be subject to a 2 percent per year tax on assets over $50 million and a 6 percent annual tax on assets over $1 billion.

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