(Associated Press) Elizabeth Warren says other Democratic presidential hopefuls are too quick to accept Republican calls for unity rather than standing up to the rich and are bending to the whims of their own wealthy donors. The sharp contrast she’s drawing is more evidence that the simmering tensions between her party’s moderate and progressives wings are boiling over.
Warren has centered her candidacy on proposing structural changes to remake the political and economic system. But the challenges to implementing her plans were reinforced early Thursday when a new academic analysis found that Warren’s signature “wealth tax” would bring in at least $1 trillion less in new government revenue than she estimates while ultimately shrinking the economy over the next 30 years. Warren’s campaign responded that the analysis was of a “different and worse” plan than what the senator is proposing.
Warren wants a 2% tax on fortunes worth $50 million-plus and a levy three times that on anyone who has a net worth of more than $1 billion. She has pledged to use those to dramatically remake government, offering universal child care and free tuition at public universities while wiping out most student debt for 42 million Americans and helping to finance a “Medicare for All” plan providing government-sponsored health care nationwide.
But the piggy bank that the senator wants to use to accomplish her sweeping policy promises won’t be nearly as flush with cash as she believes, the University of Pennsylvania’s Penn Wharton Budget Model, which provides nonpartisan analysis of public policy proposals, found Thursday.
The Penn model says the proposed wealth tax will raise between $2.3 trillion and $2.7 trillion over 10 years, or as much as $1.4 trillion less than Warren’s campaign estimates. It also concludes that the new taxes would cause the economy to contract between 0.9% and 2.1% by 2050 — depending on how the new revenue is spent.
The model says the new tax would reduce “private capital formation” enough to drive the U.S. economy’s average wage down between 0.9% and 2.3%, even affecting households not rich enough to qualify for the tax.
The findings are important because Warren’s proposal has been among the most popular — and most scrutinized —of her campaign. It’s given her an economic populist edge that helped vault her among the Democratic primary’s front-runners. The race’s other top progressive candidate, Sen. Bernie Sanders of Vermont, has proposed an even higher tax on top fortunes — but it’s such a part of Warren rallies that her crowds often break into chants of “2 cents!” in a rallying cry for her wealth tax.
The model’s analysis could provide new lines of attack for Biden and Buttigieg, who have accused Warren of basing her policy agenda on economics that don’t add up and argued that she and Sanders have demonized wealth.
Warren campaign spokeswoman Saloni Sharma said the analysis “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,” Sharma said.
In her speech, Warren notes that her plans have been roundly rejected by the wealthy and investor class who “tag any attempt to reform the rigged system as ‘divisive’ and ‘extreme’ — no matter how many Americans agree with it.”