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Warren’s Health Care Plan to Hit Traders and Investors

Warren, a Democrat from the State of Massachusetts and a candidate for President, recently unveiled how she would pay for her plan to turn the US into a single payer health care insurance system.

Warren was careful to try and avoid any taxes on the middle class, which means many of her taxes landed on the securities market.

The most direct tax will be what Warren refers to as a “small tax on financial transactions.” Here is part of her plan.

a small tax on financial transactions – one-tenth of one percent on the sale of bonds, stocks, or derivatives – would generate about $800 billion in revenue over the next ten years. The tax would be assessed on and collected from financial firms, and would likely have little to no effect on most investors. Instead, according to experts, the tax could help decrease what Americans pay in fees for their investments and reduce the size of relatively unproductive parts of the financial sector,” Warren stated.

Elizabeth Warren
Elizabeth Warren

While she claims that a financial transactions tax will have little to no effect on investors- who generally don’t make many trades- it will have a significant effect on market liquidity as each trade will be taxed.

Warren is also going to change the structure of capital gains taxes. Capital gains are imposed on investments which are held for at least year, for instance the profit made in a certain share of stock if that stock was held for at least a year.Warren’s Health Care Plan to Hit Traders and Investors

Warren intends on imposing a tax even while that security is held. Here is more from her plan.

“We can also change the way the government taxes investment income for the top 1%. Today, taxes are only assessed on capital gains when securities are sold. That means wealthy investors can put their money in the stock market, see it grow, and not pay a dime in taxes on those earnings unless or until it is taken out of the market. Under the current system, they can then pass along those shares to their heirs when they die and their heirs will be able to pay even less when they choose to sell.

“I’ve already proposed closing that loophole for how capital gains are treated when shares are passed on to heirs. But we can go a step further. Under a “mark-to-market” system for the wealthiest 1% of households, we will tax capital gains income (excluding retirement accounts) annually, rather than at the time of sale, and raise the rates on capital gains to match the tax rates for labor income. Individuals would still only pay taxes on gains and could use current losses to offset future taxes.

“Under this system, investment income will no longer be treated differently than labor income for the top 1% of households. Ultra-millionaires and billionaires won’t be able to earn income on giant fortunes year after year without paying a penny in taxes. And we can raise another $2 trillion over ten years to pay for my Medicare for All plan.”

Capital gains and income taxes are progressive depending on an individual’s income but the current top capital gains tax rate is 20% while the top income tax rate is 37%. For the top 1%, this means their investment gains will not only be taxed yearly (even though they may only be on paper), but they will be taxed at 37%.

Finally, Warren will expand her wealth tax, to tax the wealth of the top 1%, as she refers to them.

Finally, we can raise another $3 trillion over ten years by asking the top 1% of households in America to pay a little more.

“The tax burden on ultra-millionaires and billionaires is less than half that of working families in the United States. In 2019, the bottom 99% of families will pay 7.2% of their wealth in taxes, while the top 0.1% of households will pay just 3.2%. My Ultra-Millionaire Tax, a 2-cent tax on the wealth of fortunes above $50 million, tackles this head on. Under this tax, the top 0.1% – the wealthiest 75,000 Americans – would have to pitch in two cents for every dollar of net worth above $50 million and three cents for every dollar on net worth over $1 billion. With this version of the Ultra-Millionaire Tax in place, the tax burden on the wealthiest households would increase from 3.2% to 4.3% of total wealth – better, but still below the 7.2% that the bottom 99% are projected to pay.

“Today, I’m going one step further. By asking billionaires to pitch in six cents on each dollar of net worth above $1 billion, we can raise an additional $1 trillion in revenue and further close the gap between what middle-class families pay as a percentage of their wealth and what the top one-tenth of one percent pay. “

For many of the ultra wealthy, as Warren calls them, much of their wealth is tied up in their companies or in their company’s stock.

For instance, Jeff Bezos, the wealthiest American, after his divorce according to Business Insider, still owns 59.1 million shares of Amazon.

Amazon was priced at $1791 as of Friday November 1.

This comes to nearly $106 billion. That means most of Bezos’ wealth is in his company’s stock.

One estimate has Bezos paying $7 billion in yearly taxes under Warren’s plan.

While Bezos may be the wealthiest person in America, like most wealthy people, most of his money is not in cash, this means to meet his tax burden he would be required to sell several billion in his company’s stock.

Demaguagory aside, the impact on all Amazon shareholders- many of whom are the very middle class investors Warren claims to be protecting- is unclear.