Latest Posts





Sen. Warren’s wealth tax revenue estimates assume that ‘the rich’ will not change their behavior. That is unrealistic.

Taken together, the new spending proposals of Senators Sanders and Warren and Rep. Ocasio Cortez total about $42.5 trillion. You might be a little concerned by this. You might be looking at your paycheck and wondering just how much of it is going to be left after the taxes needed to fund this spending spree have been taken out.

Of course, that isn’t a problem if someone else is going to pay for it all. Rep. Ocasio Cortez proposes a new marginal top rate of tax of 70% on “the tippie-tops” earners to fund her ‘Green New Deal’. Sen. Warren claims that a new wealth tax on ‘the rich’ will help cover it.

Two problems with the wealth tax

There are two big problems with Sen. Warren’s proposal. First, it is unconstitutional.

Second, the estimates of the revenues it will bring in are based on hopelessly optimistic assumptions. She claims that the tax would bring in $2.7 trillion: just 6.3% of the $42.5 trillion new spending. But this assumes that ‘the rich’ in question will use zero legal tax shelters.

In fact, it has been known for centuries that taxes are incentives. That is why Peter the Great taxed beards: he wanted fewer beards. And the responses to these incentives – though predictable – aren’t always those the policymaker would wish for. When Britain’s Parliament taxed windows in 1696 as a proxy for a wealth tax, people simply bricked up their windows to reduce their liability.

Take a look at the picture below.

This is the oldest house in the village of Aveyron, France. It was built sometime in the 13th century. As you look up the building, you’ll see that the floors get larger. This is because the owner’s tax liability was assessed on the square footage of the ground floor. So, builders kept the ground floor as small as possible and recouped the floor space on the higher floors.

Taxes are incentives. Change them, and you’ll change behavior. Sen. Warren’s assumption that ‘the rich’ will make no response to her wealth tax is completely unrealistic.

John Phelan is an economist at the Center of the American Experiment. 


Photo Credit: Gage Skidmore




Upcoming Events

  • Morning in Minnesota: St. Cloud

    Location: St. Cloud

    Sign up HERE! Courtyard by Marriott St. Cloud 404 West Saint Germain Street St. Cloud, MN, 56301 Please join Center of the American Experiment on Tuesday, July 21 for breakfast with Center policy fellow and education expert Catrin Wigfall as she explains K-12 education in the state and its persistent disparities despite decades of increased spending. Following her presentation, Catrin will lead a Q&A session. 7:30 AM Check In and Breakfast 8:00 AM Presentation 9:00 AM Conclude   Catrin Wigfall is a Policy Fellow at Center of the American Experiment. She is also the director of EducatedTeachersMN and EmployeeFreedomMN. Catrin’s…

    Register Now
  • Morning in Minnesota: Marshall

    Location: Marshall Golf Club

      Sign up for this event HERE! Please join Center of the American Experiment on Thursday, July 16 at Marshall Golf Club for a breakfast with Center economist, John Phelan, as he discusses Minnesota’s economic future. Following his presentation, John will lead a Q&A session. 7:30 AM Check In and Breakfast 8:00 AM Presentation 9:00 AM Conclude John Phelan is a graduate of Birkbeck College, University of London, where he earned a BSc in Economics, and of the London School of Economics where he earned an MSc. He worked in finance for ten years before becoming a professional economist. He…

    Register Now
  • 2020 Annual Dinner Featuring Sarah Huckabee Sanders- Now in September!

    Location: Minneapolis Convention Center Ballroom 1301 2nd Ave S Minneapolis, MN 55403

    NEW SEPTEMBER DATE: We have made the difficult decision to once again move the date of this event. We will now host our Annual Dinner on Saturday, September 19th. All tickets bought for the April 4th, or June 18th dates are transferrable. We are so sorry for any inconvenience this has caused, but we look forward to seeing you on September 19! Direct any questions to Kathryn Hinderaker (kathryn.hinderaker@americanexperiment.org or 612-428-7005).   American President: The Unorthodox Approach to Politics that Changed the World. Sarah Huckabee Sanders served as White House Press Secretary for President Donald J. Trump from 2017 to…

    Register Now