Progressives Give Wealth Confiscation Another Go

National Review Online

Monday, March 30, 2026

 

It’s the 2020 Democratic primaries all over again. Just as they were then, progressives are trying to one-up each other with increasingly outlandish fiscal proposals. One of the worst ideas from that year’s frenzied contest — a direct tax on household wealth — is back in fashion.

 

The same characters are back to reheat old redistribution. Senator Bernie Sanders (I., Vt.) got the ball rolling, outlining a 5 percent annual tax on all billionaires’ net worths. Not to be outdone, Senator Elizabeth Warren (D., Mass.) is more ambitious. Her plan is to tax all household wealth above $50 million at 2 percent each year, with a 1 percent surtax on fortunes over $1 billion. Both senators would use the proceeds not to trim the gaping deficit, of course, but to fund a laundry list of new entitlements.

 

Although Warren’s wealth tax would be slightly kinder to billionaires, it would apply to far more Americans than Sanders’s plan. Targeting what she calls “ultra-millionaires,” it would hit an estimated 260,000 households. Sanders limits his confiscatory scheme to the 900 or so billionaires in the country, though it would surely discourage more entrepreneurs and investors from joining their ranks.

 

Like today’s wealth-tax proposals, the federal income tax was originally intended to target only the richest Americans. Less than 1 percent of people paid the income tax when it was enacted in 1913, at a rate of just 1 percent of net earnings. Once the government identifies a revenue source, however, it inevitably expands: Three-fifths of households now owe income tax at marginal rates up to 37 percent.

 

Warren is expanding the wealth tax before it has even been enacted, but it could swell further. One of the senator’s top influences, the inequality-obsessed economist Thomas Piketty, once floated the idea of taxing household wealth above a threshold as low as $260,000.

 

One reason lawmakers may broaden a wealth tax is that it would raise much less revenue than advocates project. Determining the value of every asset owned by every rich household has proven an administrative nightmare for the countries that have tried. That is largely why many European governments have abolished their wealth taxes. The rich avoid assessments by shifting their money into hard-to-value assets, such as private companies, or simply by leaving the country. Admittedly, the latter risk is far smaller in the case of the United States because, after allowing for certain “breaks,” the federal government taxes its citizens and permanent residents wherever they live.

 

The United States also imposes an “expatriation tax” (to oversimplify, taxing any unrealized capital gains above a certain limit) on people renouncing their citizenship or, subject to certain time requirements, their permanent residence status. This is not enough for Warren, who would like to see a draconian 40 percent “exit tax” on those who would otherwise be subject to her tax if they renounced their citizenship.

 

If a wealth tax could somehow raise the trillions in revenue that Sanders and Warren anticipate, it would be an enormous tax on productive investment. The tax would apply to all assets regardless of when they are sold or whether they yield income. On top of regular taxes on capital gains and dividends, even a seemingly modest rate could wipe out yearly returns. Rather than reinvesting in new ventures, billionaires and millionaires would be incentivized to spend down their wealth as quickly as possible before the government nabs it. Reduced investment would dampen growth, leaving a smaller economy and lower wages for everyone.

 

Even if Congress passed a wealth tax, it could very well be blocked by the courts. The Constitution prohibits the government from levying direct taxes — including on property — without apportioning them among the states. Income taxes are allowed under the 16th Amendment, but even the most sympathetic judge would have difficulty defining unsold assets as earnings.

 

Above all, a wealth tax would be unjust because it aims to perpetrate the very expropriation that republican government exists to prevent. The purpose of the tax code is to pay for legitimate state functions, not to seize money from one set of citizens and dole it out to another. Contrary to popular belief, the richest households already contribute the bulk of federal revenue and pay higher effective tax rates than anyone else. Any leftover wealth is rightfully theirs to spend as they see fit.

 

Absent a compelling message on affordability, progressives are attempting to channel voters’ economic discontent into class resentment. But a punitive tax on the rich would do no one any good, while risking U.S. investment and competitiveness. Sober-minded Democrats should mark the wealth tax down as a liability.