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So far, many of the Democratic candidates for president want to raise taxes on the wealthy to fund their policy plans. But what does that really mean?


There are two options: Tax the money they earn, or tax the money they have. Let’s review those options to see how they could impact our lives.

How Democratic candidates want to tax the rich

To recap, here’s what the three leading candidates want to do to increase revenue for their plans to—to put it very simply—make higher education and healthcare more affordable.


Former Vice President Joe Biden: Wants to raise income taxes for those in the highest tax bracket and tax capital gains for the 1% wealthiest people.

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Senator Elizabeth Warren: Wants a 2% annual tax on families with more than $50 million in wealth.


Senator Bernie Sanders: Potential options include raising the marginal tax income rate starting with income above $250,000. The top 0.1% of taxpayers would pay 50% tax on income above 2 million, for example. Sanders could also tax capital gains and dividends the same as income. And/or, he could establish a wealth tax on the top 0.1%. Basically, Sanders has outlined several options but hasn’t committed to a specific one.


What raising the marginal income tax rate could do

You might be thinking, “There’s no way this will work. I’m going to end up paying more.”


But some researchers insist it’s not that farfetched to raise trillions from just the richest people in the country through a progressive tax— that is, as you earn more, you pay more tax on the additional income you earn, not all the income you earn. It’s what we have now, but the candidates are saying the current version isn’t enough.


Right now, the richest 1% of households pay about 30% in income taxes . Increasing that by 10 percentage points would generate $3 trillion in revenue over 10 years, writes Michael Linden, executive director of the progressive Groundwork Collaborative. It would be a similar tax rate to what the top 1% of the population paid in the 1940s and 50s, Linden says.

With that $3 trillion, the country could “make college free at all public universities, make a massive new investment in infrastructure along the lines of what Senate Democrats have proposed, and triple the budget for the National Institutes of Health,” Linden claims in a column in The Guardian.


Beyond raising those funds, Kimberly Clausing of Reed College explains for nonpartisan Econofact that increasing taxes for the wealthy can alleviate some of the economic inequality that’s resulted from wage stagnation over the past 35 years or so .

Economists Gabriel Zucman and Emmanuel Saez argue that you can raise the marginal income tax on the richest 1% of Americans up to about 75% to maximize revenue and reduce income inequality without seeing a huge pivot to tax evasion or reduced work by the nation’s most wealthy, according to CNBC. Zucman and Saez, authors of the book Triumph of Injustice — How the Rich Dodge Taxes and How to Make Them Pay are also behind Tax Justice Now, the interactive site that lets you compare candidates’ tax plans.


What establishing a wealth tax could do

But that’s not all, folks. What about raising taxes on the wealth people already have—not just annual income, but their assets, too?


Linden writes that taxing the wealth of the richest 1% would generate $4 trillion over 10 years. That’s “More than the federal government will spend over the next decade on foster care, school lunch, school breakfast, the Children’s Health Insurance Program, food stamps, unemployment compensation, supplemental security income for the elderly, blind people and those with disabilities, and all the tax credits for working families combined,” he claims.

A potential wealth tax feels groundbreaking because it’s totally different than how wealth is taxed now . Right now, you pretty much fork over taxes when you earn money and when you sell your assets. A wealth tax would essentially tax the value of everything you hold, every year.


Any attempt by a president to levy new taxes is going to be a hard sell, because Congress creates that policy, not the president.


But that doesn’t mean Congress isn’t already thinking about this issue. Senate Finance Committee Democrats, led by Senator Ron Wyden of Oregon, are considering a wealth tax that would generate an estimated $1.5 to $2 trillion over 10 years. Wyden wants to use that money to shore up Social Security.

That tax would target people who have income above $1 million or assets above $10 million for three consecutive years and tax their assets for every year that asset gains value. If your stock portfolio improves? Pay taxes. If your house gains value? Pay taxes. If your jewelry or artwork appreciates? You get the idea.


So while the idea of one candidate stumping to levy a tax on the very wealthy seems unlikely, it’s a concept that’s rapidly gaining support among Democrats. And even if one of the many, many presidential candidates can’t get their own tax plans pushed through Congress, there’s a chance that a Democratic-majority Congress could do something on its own.