Teaching, researching and producing blueprints for tax policy that can potentially affect the entire nation — that is the daily life of two UC Berkeley professors who are currently working with Sen. Elizabeth Warren, D-Massachusetts, to address the issue of wealth disparity in the United States.
Campus professor of economics Emmanuel Saez and assistant professor of economics Gabriel Zucman are currently collaborating with Warren to create a tax plan that would change how wealth is taxed.
Warren, a Democratic 2020 presidential candidate, has proposed a 2 percent annual tax on American households with net worths above $50 million and an additional 1 percent tax on net worths above $1 billion. Saez and Zucman have been helping Warren to determine the numbers.
“Warren has been a champion for protecting middle class wealth from predatory lenders,” Saez said in an email. “Combining progressive wealth taxation with policies to rebuild middle class wealth is exactly what the United States needs to ensure vibrant and equitable growth for the future.”
According to Saez, the proposed policy would raise “sorely needed” tax revenue for public works. He added that though “modest in size,” the wealth tax could raise almost $3 trillion in 10 years.
In a letter to Warren, Saez and Zucman presented research showing that the top 0.1 percent wealth share increased from 7 percent in the late 1970s to about 20 percent in recent years. They also noted that the wealth share of the bottom 90 percent has decreased from 35 percent in the late 1970s to about 25 percent today.
“Democracies become oligarchies when wealth is too concentrated,” Saez said in an email. “A progressive wealth tax is the most direct policy tool to curb the growing concentration of wealth in the United States.”
Eric Harris Bernstein, a master’s degree candidate at the UC Berkeley’s Goldman School of Public Policy, said he is excited to see UC Berkeley lead the path to a new level of taxation and inequality analysis because there are not many “mainstream” economists addressing this issue. He added that many of UC Berkeley’s economists have contributed to work that has moved the conversation surrounding tax policy in a more progressive direction in recent years.
Zucman and Bernstein said the current tax policy in the United States has negative effects on democratic political structures.
“Once you convert your economic power to political power, you can increase your economic power through policy, (and) also through policy, (you can) further increase your political power,” Bernstein said.
Though the current income tax structure is “facially progressive,” according to Goldman School graduate student Annie McDonald, it is “incredibly regressive” when looking at its impacts on taxpayers. Since the rich can avoid taxes on assets, “the impact of that tax is going to be much more significant on the person who’s barely scraping by.”
McDonald added that because “wealth begets wealth,” it is very difficult for groups of people who have been historically discriminated against to achieve the same financial success. A wealth tax is a redistributive policy that would help to level the playing field.
“The United States is the birthplace of progressive taxation. It’s the country that has pioneered the sharply progressive taxation of income and estates, two of the most important fiscal innovations of the 20th century,” Zucman said in an email. “The time has come again for the United States to pave the way towards a modern tax system, adapted to the challenges of the 21st century.”
