Democratic Candidates Tackle Issue Of Income Inequality In 4th Debate

Presidential candidates Elizabeth Warren and Bernie Sanders would both like to impose higher taxes on the wealthy. That idea came under attack during Tuesday's debate.

ARI SHAPIRO, HOST:

Well, one of the many issues the Democrats tangled over last night is what's known as a wealth tax. That is the idea of taxing accumulated wealth to help pay for a variety of government programs. Senators Elizabeth Warren and Bernie Sanders have both advocated for it. Critics say their proposals are unwieldy and warn that rich people will find a way to get around the tax. NPR's Scott Horsley is here for a fact-check.

Hey, Scott.

SCOTT HORSLEY, BYLINE: Hi, Ari.

SHAPIRO: First, explain what Warren and Sanders are actually talking about when they call for a wealth tax.

HORSLEY: Their plans differ in the particulars, but they're both calling for an annual tax on big fortunes. In Warren's case, she wants to tax fortunes worth $50 million or more. So there are about 75,000 families in the U.S. that would fall under that tax. They would be taxed 2% on everything they own above $50 million and 3% on any wealth over a billion dollars. Now, during the CNN debate, Warren said chipping away at those enormous fortunes would help address inequality and also raise a boatload of money, which she and Sanders are counting on, to fund their ambitious government programs.

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ELIZABETH WARREN: Taxing income is not going to get you where you need to be the way taxing wealth does. The rich are not like you and me. The really, really billionaires are making their money off their accumulated wealth. And it just keeps growing.

SHAPIRO: OK. Well, one of the candidates who pushed back against Warren on this was Andrew Yang. Let's listen to that.

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ANDREW YANG: The wealth tax makes a lot of sense in principle. The problem is that it's been tried in Germany, France, Denmark, Sweden, and all those countries ended up repealing it because it had massive implementation problems and did not generate the revenue that they projected.

SHAPIRO: Scott, did all those countries repeal it?

HORSLEY: They did. He is right that a lot of countries have tried a wealth tax. A lot of them gave up on it. In fact, 11 of the 15 developed countries that had a wealth tax back in the mid-'90s have gotten rid of the levy. Only a handful are still collecting it. Part of the problem is it really is hard to administer a wealth tax. You know, assets like stocks and bonds are easy enough to account for, but if rich people put their money into, say, jewelry or art, it can be hard to know what it's worth. And that can make a lot of extra work for the IRS. What's more, the wealthy can hire very good lawyers and accountants to avoid or minimize their taxes. That's one reason a lot of countries did find that a wealth tax didn't generate quite as much money as they'd been hoping for.

SHAPIRO: So what's the alternative? Like, what's Yang proposing, for example?

HORSLEY: Yang is actually calling for a kind of federal sales tax, what's known as a value added or VAT tax. That's something a lot of countries do have, and it is very simple to administer and can raise a whole lot of money. Critics, though, say a VAT tax falls most heavily on the poor and middle class because they tend to spend more of their income while, as Warren said, the really wealthy let their money just pile up.

SHAPIRO: That's NPR's Scott Horsley.

Thanks a lot.

HORSLEY: You're welcome.

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