Not all advisors work with investors who would be impacted by Sen. Elizabeth Warren’s controversial wealth tax, but most have strong opinions about the impact the proposed tax would have on the U.S. investment markets, wealthy investors and the U.S. economy as a whole.
The controversial tax proposal, which is a centerpiece of Warren’s bid to become the Democrat nominee for president in 2020, would levy a 1% tax on those who have $50 million to $1 billion in wealth, rising to 2% for those with $1 billion and above. While Warren has put the revenues her tax would raise in the trillions, pundits are already challenging the constitutionality of the tax as well as the difficulty of valuing assets.
Of course, tax-the-rich proposals are not a new talking point for politicians or even business owners with grander ambitions. Even President Trump once floated a wealth tax proposal in 1999 as he explored a presidential bid as a Reform Party nominee. Trump's plan would have imposed a one-time 14.25 percent tax on individuals and trusts worth more than $10 million.
In contrast, Sen. Warren's proposed wealth tax would feature a much lower marginal rate but it would be permanent.
To find out exactly what advisors think of the wealth tax we asked them in an informal survey. We wanted to know what they think the fallout of Warren’s wealth tax proposal would be in terms of investment markets and the US economy as a whole. Their answers, which follow, are direct and in some cases surprising. For instance, even outspoken Democrat advisor Ross Gerber of Gerber Kawasaki in Santa Monica, CA, finds Warren’s wealth tax alarming.
Ross Gerber
President and CEO
Gerber Kawasaki, Inc.
Santa Monica, CA
“First, I want to premise my answer and say I’m a Democrat and despise Trump and firmly believe the average Joe should be better off than he is. But going after the super wealthy isn’t the solution. I’ve seen this proposal and I don’t like it. Taxing people on their savings and investments versus income is a bad idea for many reasons. First, how would you even value non-public investments. Most wealth resides with business owners with private businesses. So how do you say what my firm is worth? Once you get into private business valuations and multiple owners and then you put a tax to it, it’s a disaster. Even if you only did tax stocks and bonds, everyone would sell them and buy private investments.
“Second, it’s fundamentally un-American to tax wealth. You want to encourage entrepreneurial behavior. Warren’s tax proposal is a disincentive. Third, it’s bad and disincentivizes investing. If less capital is invested it will mean fewer jobs etc. It’s basically a poor way to tax people. This would impact few of our clients as we focus on younger investors and the mass affluent, so this would have little effect on our clients. I think It’s more about the bigger thing of taxing wealth. I think it’s a bad way to tax people.
John T. Gugle
Principle and Chief Investment Officer
Alpha Financial Advisors
Charlotte, NC
“Senator Warren's wealth tax proposal is one of the most dangerous tax proposals ever made. It directly threatens America's standing in the world as the largest economy and the land of opportunity. If this were somehow to go into effect, you would see a mass migration of America's brightest minds out of this country. It violates a basic tenant that we only tax your income once. A wealth tax would duplicate the tax you have already paid because wealth is just an accumulation of income. So how could we justify taxing you on your investment portfolio when we already tax you on capital gains & tax you on your IRA/401k withdrawals?
“Shouldn't the investor who took the risks be rewarded for their willingness to put their capital at risk? A wealth tax is grossly unfair. And if Senator Warren just wants to score political points by peddling the politics of envy and hatred, then she must truly want America to fail. The reason so many risk their lives to come here is because we give you a chance to succeed and we are the most generous country in the world. Just because someone has accumulated wealth should not make them a target of government's thirst for power and control. Rather the wealthy should be celebrated for their success since all of the taxes they have already paid on their income has generously provided for the greater good.