By James Pethokoukis

President Biden’s campaign tax plan was full of tax increases, some $3 trillion worth. But a wealth tax wasn’t one of them. And, according to The New York Times, a wealth tax is “not among the top revenue-raisers that Democratic leaders are considering” to help offset Biden’s big infrastructure-plus spending bill expected later this year.

But Senator Elizabeth Warren, a Massachusetts Democrat, is again pushing the idea. Her Ultra-Millionaire Tax Act would levy a 2 percent annual tax on households and trusts valued at between $50 million and $1 billion. All net worth over $1 billion would be taxed at 3 percent. Warren’s economic advisers think her wealth tax would raise some $3 trillion a year. (Think of that as a high-end estimate.)

In any event, I’m skeptical this debate is mostly about fiscal responsibility. Sure, Warren frames her wealth tax partly as a way of paying for stuff Democrats want. “We need to turn to infrastructure, childcare, pre-K, college,” Warren said on Monday. “We need to turn to the things that create investment and opportunity going forward and to do that, a wealth tax is the best way to pay for it.” That said, there’s little evidence that Washington Democrats think the country is rapidly running out of fiscal space. They’re not paying for the new pandemic relief bill and are unlikely to pay for more than a portion of that next big spending bill.

Perhaps what the Ultra-Millionaire Tax Act is really about, in large part, is something more cathartic: hitting the rich who have, in Warren’s view, benefitted from a “rigged” economy. It’s populism, progressive style. One might hand-wave away this notion as political virtue signaling, but doing so would understate the impact of the tax if actually implemented. This is not a small tax. These taxes are assessed annually, potentially generating de facto income tax rates of 67 percent or higher, as my AEI colleague Alan Viard has noted. The wealth tax is also cumulative. Paying an annual tax each year of 2 percent means a tax equal to 20 percent of net worth over a decade.

What’s more, a wealth tax might well come in addition to other tax hikes on personal and corporate income. Yet even if there’s just the wealth tax, I worry about the impact on economic growth and high-impact entrepreneurship. To that latter issue, I would note that some proponents concede a wealth tax would reduce the financial payoff to what they have termed “extreme cases of business success,” although they believe there would be hardly any loss of “socially valuable innovation.” From that perspective, a wealth tax would really only hurt wealthy owners who have already built businesses and are worried merely about competitive turf battles and squashing up-and-comers.

But does that really describe the American economy, where many of the super-rich are also super-entrepreneurs? Is Elon Musk really done innovating and merely using market power to fend off potential rivals? Has Amazon been stuck in amber since Jeff Bezos first became a billionaire in 1999? Aren’t those trillion-dollar tech giants spending an awful lot on R&D? Oh, and one final question: If you’re really concerned about inequality, why not push ideas such as more high-skill immigration, housing deregulation, and consumption taxes that have less potential risk to growth and our entrepreneurial culture? The wealth tax — an idea also not particularly popular in other rich countries —  seems like an idea with a wealth of red flags.

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