Could a ‘Millionaire Tax’ Work in The United States?
Something rather remarkable happened in Illinois during the 2014 midterm elections: the state’s voters elected Bruce Rauner to the governor’s office. Rauner is a conservative Republican who made a name for himself as a venture capitalist. He’s a multimillionaire, and the Illinois governorship is the first public office he’s ever held. Illinois as a state has historically leaned Democratic; it’s the state that elected President Obama to the Senate, and is home to other well-known Democrats like Senator Dick Durban. Rauner will be the first Republican governor of the state since 2002. He beat incumbent Pat Quinn by nearly 5 points.
While Rauner being elected on a conservative platform is a bit unusual for Illinois, it’s not the most interesting result of the 2014 midterm election. The voters of Illinois, who have backed Democrats in every presidential election since Clinton in the 1990s, passed a ballot initiative to institute a so-called “millionaire tax” of 3% on incomes over $1 million. Moreover, the measure was passed by a fairly wide margin of 26 points. Whether it actually does become law is an entirely different discussion (spoiler alert: you can bet that it probably won’t be).
Why is this such a big deal? Mainly because Americans hate taxes, and usually are hesitant about implementing new ones. Also, many Americans have had a particularly hard time getting behind the whole “tax the rich” mantra that has consumed many on the left over recent years. Seeing as how inequality has grown so quickly, and that many people are still struggling with the current state of the economy, a blue state like Illinois may have been the perfect place for an initiative like this to pass. But perhaps actually seeing the proposal isn’t actually the point. Maybe just getting the message across to lawmakers (and those living on the upper mezzanine of society) is enough for proponents at this time.
The effects of an actual millionaire tax being signed into law could lead to a very different outcome than expected. There could be a huge economic backlash as the rich pick up, move, and take their businesses and investments to friendlier states. In spite of that threat, the voters of Illinois are making the statement that they don’t believe society’s top earners are paying enough, and want them to contribute more. The idea isn’t that out of the box, but how do Americans really feel about it? If a 26-point margin of victory says anything, it appears that a lot of people can get behind it.
The state of New Jersey was in a similar position to Illinois earlier in 2014, when Governor Chris Christie opted to veto a bill that would have put extra tax burdens on high earners. His reasoning was simple: He didn’t want the rich to flee his state, which they may have done, and take the tax dollars they do contribute already, and their businesses with them. But this wasn’t the only time Christie had vetoed a bill concerning a millionaire tax. He did it in 2010, 2011, and 2012, as well.
While Christie’s concerns are justified, having to veto bills centered around the same idea four out of the past five years must be getting a message through from the voters of New Jersey to their governor. But the important question to ask is: are the nation’s elite getting that message as well? The millionaire tax idea isn’t simply staying confined to the East Coast and the Midwest, either.
On the west coast, NBC affiliate KING5 in Seattle says that three of the city’s council members support the idea of implementing an additional tax on the city’s highest earners. It might be easy to laugh it off as a stunt by some city council members (one of whom is a full-fledged member of the socialist party), but it’s important to remember that this is a city in which a $15 minimum wage was recently instituted, and where residents just voted to tax themselves to pay for universal pre-schooling. It’s also the largest city in a state that was one of the first to legalize marijuana. Needless to say, Seattle voters tend to lean a bit more to the left than in many other cities.
That doesn’t mean that this tax will actually make it through the legislative gauntlet, but if it has a chance anywhere, it’s probably in Seattle. And with approximately 68,000 millionaires in the Seattle area, things could get interesting very fast.
While the legality of these tax increases are questionable and actually getting them signed into law is difficult, it does seem that people from all across the country are ready to support some rather drastic tax increases on the wealthy. It may be shortsighted, as there will definitely be consequences, but that hasn’t stopped voters and certain lawmakers from throwing their weight behind it. The question is, what happens when the idea leaves the state level and is propelled on the national stage? If it makes it that far, it will definitely be interesting to see and could have some pretty widespread effects even if it is never put into law.
To get an idea of what the results might look like, we can look at the most recent example of a nation that was actually willing to give a millionaire tax a shot: France. The French implemented a 75% tax on companies that pay more than $1.4 million annually in salaries, in an effort to help shore up government budgets and fight off deficits. The tax was approved for two years, 2013 and 2014.
How did it turn out? Well, it was dropped by the country’s court system before it was ever fully implemented. Faced with high unemployment and an economy that is still struggling to find its footing, France apparently felt it was better to reverse course to try and attract those with money, rather than run them off. “I think it had an extremely devastating impact on the attractiveness of France for foreigners,” said Sandra Hazan, of Dentons Global Tax Group, as the Associated Press reported.
Obviously, things didn’t go over well for the French. Does that mean it wouldn’t work in the U.S. as well? It’s hard to say, but it’s even harder to imagine that a proposed law would ever even be brought up in Congress. Would even bringing it up on a nationwide scale scare the wealthy into fleeing the country? It might. So just imagine what would happen if it was actually passed into law. The millionaire tax idea definitely has some merits and pitfalls, but it’s easy to see that the idea is picking up steam among the electorate.