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The Wealth Tax

Dear Clients and Friends,

There has been a lot of talk recently about the “wealth taxes” that have been proposed by a few of the Democratic presidential candidates.  There has also been quite a bit of misinformation spread about these proposed taxes. At this juncture, MOR Wealth Management has not rendered an opinion about these taxes, primarily because we feel that these suggested tax proposals may evolve over the next few months. However, we thought we’d take a moment to offer some clarity.

First, no candidate has proposed a tax that would affect, in any way, the average American, or even the average “wealthy” American.  ThisThis would not be another income tax.  This new tax would be levied based on one’s net worth, and only on net worth above an extremely high threshold, which we discuss below. The most frequently discussed versions of this wealth tax have been proposed by Bernie Sanders and Elizabeth Warren, so let’s briefly summarize those.

Warren has proposed what she refers to as the “two cent tax.”  This would be a tax on the 75,000 wealthiest families in the country. It would add a 2% tax on household assets exceeding $50 million and a 3% tax on household assets exceeding $1 billion. For clarity, the tax would only be levied on wealth that exceeds these limits.  So, if a taxpayer is worth $50 million and one dollar, the tax would only apply to the one dollar that is greater than the $50 million threshold. Sanders’ plan works the same way, albeit with different percentages and thresholds.

Sanders’ proposal is a bit more aggressive and would affect more households.  For married couples, Sanders’ plan includes the following: a 1% tax on wealth above $32 million for married couples, 2% on wealth between $50 to $250 million; 3% on wealth between $250 to $500 million; 4% on wealth between $500 million to $1 billion, 5% on wealth between $1 to $2.5 billion, 6% on wealth between $2.5 to $5 billion, 7% on wealth between $5 to $10 billion, and 8% on wealth over $10 billion. The same structure applies to single taxpayers, except that each level of wealth is halved.  To put Sanders’ numbers into perspective, an unmarried person with a net worth of $16.5 million would pay a $5,000 tax, as would a married couple with a net worth of $32.5 million. As I mentioned, these thresholds do not apply to most taxpayers, and, in time, would only apply to about 10% of our family of clientele.

Warren’s plan is estimated to raise $2.75 trillion in revenue over 10 years while Sanders’ plan is estimated to raise $4.35 trillion.  Sanders plans to use this money to pay for his affordable housing plan, universal childcare, and would help fund Medicare for All.

Among Warren’s reasoning for the tax is that, the 400 richest Americans currently own more wealth than all Black households and a quarter of Latino households combined. According to an analysis from economists Emmanuel Saez and Gabriel Zucman from the University of California-Berkeley, the richest 130,000 families in America now hold nearly as much wealth as the bottom 117 million families combined.

There are some issues that would need to be worked out, which is why we have refrained from rendering an opinion at this early stage.  For example, with regards to Sanders’ plan, a married couple worth $60 million could avoid the tax by simply getting divorced.

Some in the media have argued that both plans are unconstitutional. However, America has imposed various forms of a wealth tax (or asset-value-based taxes) for over a hundred years.  Some examples are property taxes (which are based on the value of a person’s real estate assets) and federal estate taxes (which are based on the value of a decedent’s estate). Article 1, Section 8 of the Constitution grants Congress plenary power to impose any and all “taxes, duties, imposts and excises.” Due to partisan opposition, an attempt to implement either tax proposal would likely be brought before the Supreme Court. But historically, the Court has ruled on similar matters in favor of the tax.  The one exception to this trend came in 1895, when the Supreme Court used an obscure clause to declare that the federal income tax was unconstitutional. However, this judgment was overruled by the ratification of the 16th Amendment in 1913, which states: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.”

In conclusion:

  1. In both of the plans discussed here, the taxes proposed would only apply to net worth that exceeds certain limits.For example, in Warren’s plan, the lowest bracket would see a tax ONLY on wealth in excess of $50 million.So, a married couple worth $49 million would not have any wealth tax levied on them.

  2. This is a tax on extremely high net worth and is not a new income tax. These tax proposals would not affect, increase, decrease, or otherwise alter anyone’s income tax.

As election season draws near, we intend to bring you helpful information related to how our personal finances could be affected by various candidates’ proposed legislation. This article gets that ball rolling, but I doubt that we will write frequently about politics until we are really in the thick of election season. 

For now, we wish everyone a wonderful weekend.



Matthew Ramer, AIF® Principal, Financial Advisor MOR Wealth Management, LLC

1801 Market Street, Suite 2435 Philadelphia, PA 19103 P: 267.930-8301 | c: 215-694-4784 | f: 267.284.4847 |

601 21st Street, Suite 300 Vero Beach, FL 32960 P: 772-453-2810

The majority of this content was written and distributed MOR Wealth Management, all rights reserved. Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a registered investment adviser. Fixed insurance products and services offered through CES Insurance Agency.


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