In rally after rally, from Seattle to Denver to Detroit, Sen. Elizabeth Warren had only to raise two fingers over her head and thousands of supporters would chant: “Two cents! Two cents! Two cents!” — shorthand for Warren’s idea that America’s richest families should pay an annual “wealth tax” of two cents on the dollar.
When Warren (D-Mass.) dropped out of the presidential campaign in March 2020 amid criticism that her agenda was too far left for the country, the idea appeared destined for the dustbin of history.
Nevertheless, it persisted.
It’s not exactly what Warren offered on the campaign trail, but as negotiations over President Biden’s legislative agenda have led to a potential revenue shortfall, Democratic leaders are taking another look at a wealth tax. They are weighing a levy targeted at the country’s billionaires — a concept similar to the one popularized by candidate Warren.
Her allies are relishing the moment and finding some degree of irony in the notion that the idea resembling the centerpiece of her platform might help seal the legislative legacy of her onetime rival Joe Biden.
“Biden’s agenda was about to fall apart, but Warren had a plan for that,” quipped Adam Jentleson, a former top congressional aide who supported Warren’s campaign, playing on one of her campaign slogans. “People are gravitating toward this idea because it is extremely good.”
Jentleson, who worked for former Senate Majority Leader Harry M. Reid (D-Nev.), said it was unusual for such a major idea to arise in the final stages of a negotiation. “I can’t remember an idea this big, and that is this much of a flash point, sliding in under the wire at this late stage of a negotiation,” he said.
It is not certain the idea will survive the next few days — or even hours — in the rush to hammer out the final outlines of a deal. But even if it falls by the wayside, Democratic leaders’ interest reflects a willingness in the party to take on the wealthy that is an echo of Warren’s message.
And some powerful Democrats see a tax on the country’s richest as a way out of their negotiating stalemate.
“We probably will have a wealth tax,” House Speaker Nancy Pelosi (D-Calif.) said Sunday on CNN’s “State of the Union.” The Senate Finance Committee is preparing to release a plan early this week that could include the idea.
Warren, who at one point was considered the front-runner for the 2020 Democratic nomination, has kept a relatively low profile since dropping out of the race and returning to the Senate. Though many of her staffers have found key positions in the Biden administration, her influence on his policy agenda has been less evident.
The senator has had difficulty, for example, convincing the president to forgive $50,000 per person in student loans. And though she published a book this year, she has largely stayed out of the news, pushing her agenda behind closed doors.
In contrast, Sen. Bernie Sanders (I-Vt.) — who left the campaign trail shortly after Warren — has played a high-profile role during the Biden presidency, largely due to his perch as chairman of the Senate Budget Committee.
But Warren’s notion of a wealth tax was abruptly revived when Sen. Kyrsten Sinema (D-Ariz), a centrist, objected to raising corporate income tax rates to help pay for Biden’s expanded safety net, leaving Democrats with a revenue shortfall. A wealth tax seemed to fit the bill.
Warren’s allies note that she is well-versed in pulling levers behind the scenes, and said they were not surprised that she had continued to embrace the wealth tax even after running on it and losing.
Warren declined to be interviewed for this story.
An aide to the senator, who spoke on the condition of anonymity because they were not authorized to speak publicly, emphasized that the final shape of the plans is still unclear. But Warren spoke with Sinema in recent days about tax policy, a Warren spokeswoman said.
The specific idea now under consideration is being termed a “Billionaire’s Income Tax.” Developed by Sen. Ron Wyden (D-Ore.), who chairs the Senate Finance Committee, it would tax financial gains on all tradable assets annually, even if they have not been sold.
Experts believe the tax would net anywhere from $250 billion to $500 billion the first year, when it would have its biggest impact.
“In a package that’s supposed to be about giving everybody a shot to get ahead, it would be a big mistake, from both a policy and political perspective, not to ask billionaires to pay a fair share,” Wyden said in a statement. “The Billionaire’s Income Tax is about fairness and showing the American people taxes aren’t mandatory for them and optional for the wealthiest people in the country.”
While there are differences between this Billionaire’s Income Tax and the version that Warren ran on, both are rooted in the concept that the federal government should tax wealth and not just income, said Gabriel Zucman, an economics professor at the University of California at Berkeley, who along with his colleague Emmanuel Saez, helped Warren write her wealth tax proposal during the campaign.
“Right now the tax system is income-based, so you pay depending on your income,” Zucman said. “In both the Warren wealth tax and this billionaire tax, what matters is not your income — what matters is your wealth.”
Both plans also depend on the idea that wealth is an indicator of a person’s ability to pay taxes, Zucman said. “Some people have a lot of income and relatively little wealth,” he said. “Others have a lot of wealth and relatively little in taxable income. And so that’s why it can make sense to have both an income tax and a wealth tax.”
The current version is also targeted much more tightly than Warren’s proposal and would only affect about 700 Americans — or the wealthiest 0.0002 percent of the country. Warren’s wealth tax was designed to tax all fortunes over $50 million, and would have affected about 100,000 Americans.
Zucman said he was struck by the drama of the plan quickly falling out of favor when Warren dropped out, only to come back into vogue again.
“In some sense, it’s super surprising and it’s an incredible twist,” Zucman said. “But when you look at the history of taxation in the U.S., you sometimes see some kind of dramatic U-turn or evolutions.”
The coronavirus pandemic has exacerbated inequities, economists say, with the rich emerging with more wealth while many of those with lower incomes either lost their jobs or faced daunting medical bills. And inequity has become more of a focus of much of the Democratic Party’s base.
Still, the idea of a billionaire or wealth tax was not part of the initial package of revenue ideas when Biden and his allies first introduced the Build Back Better agenda. Rather, Democrats planned to raised the corporate income tax, which had been cut sharply to 21 percent under President Donald Trump. But Sinema objected.
A Senate Democratic aide, who spoke on the condition of anonymity because they were not authorized to speak publicly, said that so far no Democrat has objected to the idea of using the billionaire’s tax to fill the gap. On Friday, a spokesman for Sinema, John LaBombard, did not confirm or deny her support for the billionaire tax.
The potential adoption of the idea is a clear twist in Democratic politics, given that Warren’s proposal was panned by her more ideologically moderate rivals during the party’s presidential primary contest.
During a presidential debate held almost exactly two years ago, Warren’s wealth tax was picked apart by her competitors, at a time where her political fortunes appeared to be on the rise and she was driving the conversation within the party.
Former congressman Beto O’Rourke (D-Tex.) accused Warren of being “punitive” to the very rich. Tech entrepreneur Andrew Yang said Warren’s idea has failed in other countries.
And Biden suggested that Warren would never be able to push her idea over the finish line.
“We all have good ideas,” Biden said. “The question is, who is going to be able to get it done?”
Tory Newmyer and Jeff Stein contributed to this report.
