Warren’s Wealth Tax and the Return of Feudalism

Under the “classic” feudalism introduced in England by the Normans after their hostile takeover in 1066, ownership of land and anything built upon it ultimately belonged to the crown. Movable property was a different matter. What was yours was essentially yours, if subject to levies at awkward moments. That probably means that Senator Elizabeth Warren thinks of Willian the Conqueror as having been a soft touch. Should her Ultra-Millionaire Tax Act pass (and be found to be constitutional), everything, however contingently, will become property of the state. As of late March, ten senators and 39 congresspeople had co-sponsored Warren’s bill.

The extent to which such a tax would downgrade American citizens to American subjects is only underlined by the measures proposed to ensure that the “ultra millionaires” cannot escape its grip. One reason many similar taxes elsewhere have been abandoned is that they have led to exoduses of wealth and talent. But American federal taxes follow citizenship, not residence, a principle followed by no other country other than, to an extremely limited extent, Eritrea. And renouncing U.S. citizenship can be expensive (primarily a tax on all unrealized capital gains for those with a net worth above $2,000,000), although that is not enough for Warren, whose proposed Reichsfluchtsteuer (to use a pre-war German term) would be stiffer than that.

To be sure, damaging effects on the economy aside, Warren’s tax on “ultra-millionaires” would be irrelevant for most, but as we mentioned in a recent editorial:

The federal income tax was originally intended to target only the richest Americans. Less than 1 percent of people paid the income tax when it was enacted in 1913, at a rate of just 1 percent of net earnings. Once the government identifies a revenue source, however, it inevitably expands: Three-fifths of households now owe income tax at marginal rates up to 37 percent.

Warren and her gang are beginning this process even before her law passes. The proposed tax is not just aimed at billionaires, a group who have been villainized for years (for a recent example, check out the recent video by New York City’s Mayor Zohran Mamdani) but would reach as far down as the pockets of those worth $50 million, the latter a figure that Warren has not changed since first putting forward this tax in 2019, even though $50 million then is equivalent to over $60 million in 2026. Moreover, those approaching the $50 million threshold will also be caught up, forced to prove they have not crossed that dreaded threshold. Their financial privacy will be consigned to the past, as, of course, will be that of those who must pay the tax. If passed, it would be levied at an annual rate of 2 percent on the assets of those worth $50 million and 3 percent on those belonging to billionaires. According to Emmanuel Saez and Gabriel Zucman, two French economists backing Warren’s tax, some 260,000 American households would be hit.

While very few—absent savage inflation—will have to worry for now about being caught within Warren’s net, the fact that this tax is not only targeted at billionaires already sends a message. It will not be long before the definition of ultra-wealthy is defined further down, and more and more citizens find themselves caught in a tightening net.

To start, Warren’s assertion that the tax would raise $6.2 trillion over ten years essentially rests on the assumption that those paying it would not change their behavior in response to the raid on their finances. According to research prepared by the University of Pennsylvania in 2019, the actual amount raised would be far less than Warren then claimed. The people at UPenn were not the only analysts who found that Warren’s estimates were too high, and the same is likely true today. The tax will supposedly fund “universal, affordable” childcare, expand the Child Tax Credit, lower the Medicare eligibility age to 55, establish tuition-free community college, and pay for much more besides. If revenues disappoint, will spending be cut or will taxes be increased?

Yes, that is a rhetorical question.

And the economic implications of Warren’s current proposal are bad enough as it is. The Wharton researchers estimated that the tax would reduce GDP growth, private capital formation, and wages. That the victims of this tax would include those that it is (nominally) meant to help will not unduly concern Warren and her team. For all the pretty talk about fighting poverty, improving education, and all the rest, wealth taxes are about power. The political rewards they deliver will be what counts. Demonizing and dehumanizing the “rich” is designed to harness populist support to the ambitions of the progressive intelligentsia, a task that may be made easier if AI wreaks havoc in the labor market.

Not all the kumbaya is insincere. Some leftist leaders may really believe they are working toward a fairer world: Millenarianism is a seductive psychosis. However radiant (to some) this vision of the future, its promise of a preceding purge of the supposedly sinful is also part of its appeal. The spite and the jealousy displayed by wealth tax activists toward the “rich” is no less genuine for being strategically useful. They, one part of the elite (or would-be elite), see what another part has, and they crave it for themselves. They are enraged at the thought that they have been left behind by people they see as money-grubbing moral inferiors. Their egalitarianism is a tool to create a system in which they and their acolytes take the spoils.

And then there’s "limitarianism," the name that Belgo-Dutch philosopher Ingrid Robeyns uses for her plan to cap “the amount of wealth any one person can have.” Robeyns maintains (as related by The Atlantic’s Christine Emba in 2024) that the superrich “would be better off morally and psychologically” without their wealth. For Robeyns to appoint herself both priestess and psychiatrist is presumptuous, but it takes presumption to put a lid on the aspiration of millions.

At this point, the ghost of Harrison Bergeron leaps into view, hotly pursued by Diana Moon Glampers, Kurt Vonnegut’s handicapper general, a job that Robeyns would relish.

From Emba's piece:

Robeyns proposes two upper limits on personal wealth. Most countries with a solid social safety net should bake a 10-million-euro (approximately $10.8 million) cap into their social and fiscal systems, she argues. As an ethical guide, individuals should limit themselves to 1 million (perhaps $5 million in the less secure United States, where one mistimed hospital bill could be enough to thrust a household into bankruptcy). She also notes ruefully that both proposed numbers are also less restrictive than some philosophers’ ideal: In The Laws, for instance, Plato argues that the wealthiest people shouldn’t be able to have more property than four times what people with the least have.

Robeyns’s ideas have little to back them up other than (I suspect) the resentment common among a caste convinced it is being denied the status and authority that is its due. Her limitarianism’s most revealing characteristics are not its intellectual content but its timing, Robeyns’s social position (a professorship at Utrecht University in the Netherlands), and the fact that it has attracted a fair degree of attention.

The progressive clamor for wealth taxes is growing louder and is reflected at both the state and federal levels as well as internationally. French economist Thomas Piketty (flawed math and all) is hailed globally as some kind of sage, and there is increasing interest in degrowth, a purportedly environmentalist recipe for egalitarian despotism, for which Robeyns -- a climatist, naturally -- seems to have some sympathy. And, as mentioned above, Warren herself cites two more French economists, Emmanuel Saez and Gabriel Zucman (both of whom, among other activities, teach at Berkeley) in her pitch. Meanwhile, the Brazilian government has proposed a global wealth tax, an idea backed by elements within a transnational establishment that is always interested in gnawing away at liberty, democracy, and the West. Zucman is a supporter. And massing below them is the lumpenintelligentsia -- Mamdani voters and their ilk on both sides of the Atlantic -- or the would-be commissars who think that they should be in charge.

Property rights, by empowering those who can take advantage of them, can operate as a bulwark against the egalitarian tide. In Capitalism and Freedom, Milton Friedman observed that within a free-market system, economic power is separated from political power. This enables “the one to be an offset to the other.” Robust property rights are an essential part of the same equation. They make free markets possible and help embed them, whether directly in the business world or, indirectly, by giving the successful the wherewithal to push back against the encroaching state.

In 1993, I went to Tallinn, the Estonian capital, almost exactly two years after the small Baltic state had won back its independence from the USSR. At the time, Estonia had embarked on radical free-market reforms, but privatization, a critical part of those reforms, was being slowed by the difficulty of restoring property that had been expropriated during three successive periods of foreign occupation between 1940 and 1991. Reversing confiscations half a century or so after they had occurred was not straightforward. Nevertheless, Mart Laar, then Estonia’s prime minister, insisted to me that wherever possible, there should be restitution, even if it meant some delay. The reasons for this were both moral and practical.

The former ought to be self-explanatory. As for the latter, Laar said that, "Western countries have forgotten that the basis of their economic system is [private] property.” It was, he argued, impossible to have an effective free market without demonstrating that property rights were real. Thus, the importance of returning property to its rightful owners, even after fifty years. People with no confidence that what was theirs would remain theirs would, Laar told me, question the value of working to build up a business intended to endure. With wealth taxes on too many agendas for comfort, his words are worth remembering. Estonia became one of post-communist Europe’s success stories. It operated a low flat tax for almost a quarter-century. A wealth tax there was and is out of the question.

Half a world and the whole of a mindset away, Zohran Mamdani recently raised the possibility of a 50 percent city death tax on estates in excess of $750,000. This was “only” a ploy in Mamdani’s negotiations with New York State over Gotham’s funding, but that he felt that he could even raise it says something.

Those who cross the Rubicon don’t stop at the riverbank.

The Capital Record: Sound & Vision

We released the latest in our series of podcasts, the Capital Record. Follow the link to see how to subscribe (it’s free!). The Capital Record, hosted by financier David L. Bahnsen, makes use of two formats to deliver Capital Matters’ defense of free markets. The original podcast continues, but if you want to watch David talk, please click on the YouTube link.

Legal Reform as the Supply-Side Issue of Our Day (Podcast/YouTube)

David concluded an 18-month research project and interviews with a dozen attorneys and judges, culminating in a lengthy piece on the disaster of our current legal system. In today’s Capital Record, he offers a dozen desperately needed reform ideas and concludes with one that is more important than all of them put together. Hint: It doesn’t involve the judicial system.

Show Notes: David’s National Review magazine article, “The Next Supply-Side Battle”

The Capital Matters week that was...

Defense

Andrew Stuttaford:

The world gets more dangerous, it sometimes seems, by the moment. Contrary to the views of some, there’s a limit to the extent to which that can be wished away by treaties and goodwill. The current shifts in military technology and the ease of access to its products will have to mean a fresh technological revolution in this country, as well, I suspect, as a major reworking of our defense procurement and manufacturing.

Mackenzie Eaglen:

After three decades of guided degradation and two long wars, the U.S. military is in need of a comprehensive refresh of its combat systems, technology, infrastructure, doctrine, and training. Deep in the “Terrible 20s,” America’s military is attempting to recapitalize both its conventional and strategic forces in the same decade, when all the bills are due simultaneously.

This is why a suggested record-high defense increase on top of last year’s large request is needed. The proposed fiscal year 2027 defense budget — totaling $1.5 trillion — seeks a surge in capital investment comparable to the Reagan buildup. Further, it takes time to redress readiness of high operations tempo, rebuild for the current moment, and jump-start an institution that has been in stasis.

Antitrust

Michael Toth:

Blue-state attorneys general (AGs), led by California’s Rob Bonta, are eyeing an eleventh-hour move to derail the blockbuster Paramount–Warner Bros. Discovery (WBD) merger, a $111 billion tie-up that would place HBO Max, a portfolio of cable channels including CNN, and WBD’s extensive film library and studio operations under the control of Paramount CEO David Ellison...

The Fed

John Puri:

Kevin Warsh sat in the firing line today for his confirmation hearing for chairman of the Federal Reserve. There were no surprises — Warsh is a smart man, and he performed ably.

We already knew how this confirmation fight will go: If the Department of Justice drops its criminal probe into current Fed Chairman Jerome Powell, Warsh will sail through committee, win a party-line vote on the Senate floor, and be leading the central bank by mid-May. If the probe continues, as President Trump says it will, the retiring Senator Thom Tillis (R., N.C.) will block Warsh’s committee vote. Tillis could always cave, but neither he nor Trump has yet shown signs of backing down…

Demographics

Andrew Stuttaford:

Signs of radicalization among young voters are growing harder and harder to miss, and it is a trend that is not likely to ease up any time soon. At its core, much of it is a byproduct of elite overproduction, a term coined many years ago by Peter Turchin, then a professor at the University of Connecticut...

Spirit Airlines

Andrew Stuttaford:

A wise man once said that “the nine most terrifying words in the English language are: I’m from the government, and I’m here to help.”

And so to Spirit Airlines and the “helpful” intervention by the antitrust authorities in 2023…

Veronique de Rugy & Gary Leff:

The Trump administration is considering a $500 million bailout for Spirit Airlines, and, judging by some accounts, this isn’t merely a cash injection. Reportedly, the deal would give the federal government warrants to acquire 90 percent of the airline’s equity. If so, Washington would hold the power to become the controlling owner at any moment of its choosing. For a company in bankruptcy with no meaningful private investors waiting in the wings, that is nationalization in everything but the paperwork…

Tax

Andrew Stuttaford:

New York City’s Mayor Zohran Mamdani recently released a smug little video promoting New York State’s proposed new pied-a-terre tax, basically an extra (and steep) levy on expensive ($5 million and above) NYC property owned by people who do not live in the city (and thus make less use of its services, but never mind). In it, Mamdani pointed to an apartment bought by Ken Griffin for $238 million. Griffin, the founder and CEO of Citadel, used to live in Chicago, but, after things went downhill there, moved to Florida along with much of Citadel’s business operations…

Canada

Matthew Lau:

[O]n policy substance, there has been no change in direction. The fiscal and economic benefits of taking some employees off the federal government’s payroll are more than offset by new spending. Carney promised more than $13 billion for a homebuilding initiative and budgeted over $12 billion to subsidize “strategic industries.” He has increased funding for public broadcasting, arts, and climate change initiatives. Carney is also continuing Trudeau’s disastrous $10-a-day national child-care program – an effective government takeover of Canada’s child-care sector that has created widespread shortages, hurt quality, and strangled private providers while costing taxpayers billions each year…

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