A new non-partisan study by the University of Pennsylvania’s Wharton School finds that presidential hopeful Sen. Elizabeth Warren’s (D-Mass.) proposed wealth tax would lead to lower wages and gross domestic product (GDP) by 2050.
It also found that the wealth tax would generate at least $1 trillion less in tax revenue over a decade than her campaign estimated.
Warren’s wealth tax would impose a two percent tax on individuals worth more than $50 million and a six percent tax on individuals worth more than $1 billion to help pay for a variety of liberal policies.
The Wharton study notes that in 1990, twelve nations of the 36-member Organisation for Economic Co-operation and Development (OECD) implemented a wealth tax. But by 2019, only four countries — Belgium, Switzerland, Spain, and Norway — had a wealth tax in place.
According to the study, nations got rid of their wealth taxes after they failed to generate the expected revenues or combat wealth inequality.
“An OECD review concluded that administrative difficulties, modest revenues, and failure to adequately address wealth inequality are among the main reasons why most member countries have abandoned wealth taxes.”
Warren estimates that her wealth tax would generate $3.75 trillion over a decade. But Wharton’s projection finds that her wealth tax would generate between $2.3 trillion and $2.7 trillion over a decade, after accounting for tax avoidance.
“PWBM estimates that Senator Warren’s proposed wealth tax would raise about $2.7 trillion over fiscal years 2021-2030. This projection includes the effect of foregone revenues due to tax avoidance, which includes both legal responses by taxpayers to reduce their tax exposure as well as illegal evasion.”
Wharton projected that if there was no tax evasion “legal or illegal,” her wealth tax would generate $4.8 trillion in revenue over a decade. But with “extreme evasion,” it would generate far less than her estimate with $1.4 trillion in revenue.
Additionally, Wharton found that Warren’s wealth tax would hurt economic growth and lower wages for those who are not subjected to the wealth tax.
“PWBM projects GDP in 2050 would fall between 1.1 and 2.1 percent, depending on the productivity of the investment. Average hourly wages in the economy in 2050, including wages earned by households not directly subject to the wealth tax, would fall between 0.8 and 2.3 percent due to the reduction in private capital formation.”
Wharton says that it used data from nations that had implemented a wealth tax to project the effects of Warren’s wealth tax but notes that the actual effects would ultimately depend on what tax avoidance measures U.S. lawmakers implement.
A spokesperson for Warren’s campaign refuted the findings of the study, claiming it is analyzing a “different and worse plan than Elizabeth’s.”
Spokesperson Saloni Sharma told Fox News:
“This analysis does not study Elizabeth’s actual plans — it does not account for the strong anti-evasion measures in her wealth tax and does not even attempt to analyze the specific investments Elizabeth is committed to making with the wealth tax revenue. This is an analysis of a different and worse plan than Elizabeth’s, using unsupportable assumptions about how the economy works, and its conclusions are meaningless.”
The study calls the idea of a wealth tax a “novel tax concept” but notes that there have been few studies on the impacts of such a policy.