Three prominent progressives all want to tax the wealthy to reduce income inequality, not just raise revenues. But their plans are different in key ways.

In the last month, Alexandria Ocasio-Cortez, Bernie Sanders, and Elizabeth Warren have all unveiled plans for taxing millionaires and billionaires. (Photo: Bill Pugliano, Joe Raedle, Chip Somodevilla/Getty Images; Ian Hurley)

Over the course of the last month, a number of high-profile progressives have released big, bold proposals to tax the wealthy.

Senator Elizabeth Warren (D-Massachusetts), who announced in late December she was forming a presidential exploratory committee, has proposed an annual wealth tax of 2 percent on ultra-millionaires with assets over $50 million, and 3 percent on those with over $1 billion.

Representative Alexandria Ocasio-Cortez (D-New York) recently proposed increasing the income tax rate on the top bracket—effectively on all dollars made above $10 million a year—to 70 percent to fund her "Green New Deal."

And Senator Bernie Sanders (I-Vermont), who has yet to formally announce if he'll seek the presidency in 2020, has proposed reducing the threshold at which the estate tax applies, from $11 million to $3.5 million, and increasing rates for some estates, including raising them up to 77 percent for billionaires.

There's likely never been a better time to tax the rich. Income inequality and wealth inequality have reached historic levels, conditions which experts warn are threatening the fabric of American society. At the same time, the wealthiest Americans now pay less as a percentage of their income than they have since the mid-1980s. Voters like the concept too: In a recent poll conducted by Morning Consult, 45 percent of all voters polled supported Ocasio-Cortez's plan (as opposed to 32 percent who disapproved), including 31 percent of Republicans. Meanwhile, a whopping 61 percent of all voters, and 50 percent of Republicans, supported Warren's plan.

So what's the best way to do it?

The answer to that question depends on your goals. There are two primary reasons that the government levies taxes: to raise revenue and to discourage undesirable behaviors. The income tax, for example, is mostly a revenue raiser these days: The government isn't trying to discourage people from earning money, it simply needs revenue to fund vital programs. So-called "sin taxes," by contrast, such as existing cigarette or soda taxes, or proposals for carbon taxes, do raise revenue, but are also explicitly levied with the goal of nudging people to stop smoking, drinking sugary soda, or using too much carbon.

From a pure revenue-raising perspective, Warren's plan wins. Economists Gabriel Zucman and Emmanuel Saez, who consulted on the plan, project it would raise about $2.75 trillion between 2019 and 2028. Bernie Sanders, meanwhile, estimates that his estate-tax expansion, which is supported by economist Thomas Piketty, would raise $2.2 trillion "from the nation's 588 billionaires" over an unknown time period, subject to the timing of those billionaires' deaths. The Washington Post, in consultation with a team of tax experts, estimates that, if the current pool of taxable income over $10 million remained stable, Ocasio-Cortez's plan would raise about $72 billion a year (or $720 billion over 10 years). (Few, however, expect that pool to remain stable, so the plan would likely ultimately raise quite a bit less than that.) All of these plans would require a renewed focus on compliance and closing tax loopholes to be effective.

It's not quite accurate to describe these proposals as radical: The United States used to have much higher marginal income tax rates on top earners—up to 92 percent in the 1950s—and a number of European countries have wealth taxes, like that which Warren proposes. Sanders' estate tax proposal would simply return the threshold to Obama-era levels.

But what's particularly fascinating about the spate of recent proposals is the degree to which their messaging is not actually centered on raising revenues. The politicians proposing these plans are explicitly labeling excessively high incomes, excessive wealth, and excessive intergenerational transfers of wealth as social ills that should be discouraged, in the same way we discourage smoking. Ocasio-Cortez's plan, for example, is expected to discourage salaries over $10 million, perhaps leaving more money in companies' coffers to pay other workers or invest in employee training. Likewise, Warren's plan would slow the growth of extreme wealth, while Sanders' plan would reduce the size of intergenerational wealth transfers and counter the growing clout of dynastic families like the Waltons and the Kochs.

This is a meaningful departure from the recent past, in which politicians of both parties rushed to declare that they had no interest in "punishing" the wealthy and successful.

"What's really new is that this is a different kind of explanation for the problems in the economy," says Vanessa Williamson, a fellow at the Brookings Institution who studies taxation. "In the Clinton and the Obama eras, the explanation [for why we should tax the rich at higher rates] that was given was primarily that wealthy people could better afford it, and we needed the revenue. Whereas now what we're seeing is a real shift toward ... explicitly naming wealth concentration as a problem."

Of course, none of these proposals will advance while Republicans hold the presidency and the Senate. Conservatives (and certain left-leaning billionaires) argue that the various tax proposals progressives are floating would be damaging to the American economy. The GOP's 2017 tax-reform legislation actually reduced marginal income tax rates on top earners, increased the estate tax threshold to its current $11 million level, and disproportionately delivered its gains to the wealthiest Americans. Three Republicans, including Senate Majority Leader Mitch McConnell, introduced legislation last month to repeal the estate tax entirely.

But to Williamson, these proposals represent more than just one-off policy proposals that will appeal to a lot of Americans, including—thanks to their exclusive focus on the ultra-rich—many white-collar professionals who flocked to the Democratic Party in 2018. They also represent the beginnings of a coherent economic message, after decades of "muddled" messaging from Democrats.

"The Republican Party for decades had a very clear explanation of the economy: The wealthy are job creators, people who run businesses. Low-income people are lazy. The problem is government regulation and high taxes," Williamson says. "Democrats had a laundry list of problems they were trying to solve but no coherent narrative or explanation of the disease. What you're seeing from the Democratic Party, at least on the Warren side, is a willingness to point at a diagnosis."