A week after announcing a controversial new wealth tax, Senator Bernie Sanders introduced another plan to address wealth inequality. The Sanders campaign made the announcement on Monday, saying the self-proclaimed Democrat socialist wants to address the massive pay difference between executives and workers.
The plan called for increasing the corporate tax rate by half a percent on companies that pay their chief executives 50 times more than the average employee. The tax will be imposed on companies that bring in more than $100 million or more in annual revenue. The idea has been described as a “sin tax,” which is aimed at curbing harmful behavior.
“Something wrong when the top one percent owns more wealth than the bottom 92 percent,” said the Vermont senator. “Something very wrong when 49 percent of all new income today is going to the top one percent.”
Interestingly enough, Sanders sits in the one percent. Tax returns show he made more than $1 million in 2017, mainly from writing books which called for higher taxes on wealthier Americans.
This comes as President Trump recently said he would reveal a tax overhaul plan next year. He said it will be a “very substantial tax cut for middle-income folks.” According to the White House, the president’s 2017 overhaul included $5.5 trillion in gross tax cuts, 60 percent of which went to working families.
“Wages are rising, incomes are soaring, and inequality is falling at the fastest rate in many, many years,” said President Trump. “In the past 12 months alone, the average worker has taken home $1,000 extra in rising wages and over $3,000 with tax cuts and all of the other things that we’ve done.”
The legality of Sanders’ plan, as well as one recently announced by fellow Democrat candidate Elizabeth Warren, remains under debate by legal scholars who say a constitutional challenge is inevitable. The Constitution originally granted Congress the power to impose direct taxes collecting an equal amount in each state. The 16th Amendment, ratified in 1913, overrode that power and gave the government the ability to impose an income tax without concern to an equal amount per state as long as the direct tax comes from income.
Because a wealth tax is a direct tax, it could be blocked. However, a provision to the current tax code could tax an assumed annual return, similar to an income tax. It depends on how the Supreme Court interprets the idea of a direct tax, which is not specified in the Constitution and hasn’t been discussed for some time. This all also depends if Bernie Sanders or Elizabeth Warren secure the nomination or not.