Oct 18, 2019

Former Treasury chief Larry Summers does not like the wealth tax

Dion Rabouin, author of Markets
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Adapted from Emmanuel Saez, 2019, "Taxation of Financial Capital: Is the Wealth Tax the Solution?; Chart: Andrew Witherspoon/Axios

A Twitter debate about the veracity of an economic study projecting the outrageously low tax rates of billionaires turned into a verbal street brawl at the Peterson Institute for International Economics in Washington Thursday.

Background: Criticism has been heaped on a Washington Post op-ed by Emmanuel Saez and Gabriel Zucman purporting to show that for the first time in U.S. history billionaires paid a lower tax rate than the working class.

  • Critics have taken issue with the study's conclusions and methodology.

What happened: Economist Larry Summers tore down the study and its co-author Saez, who was in attendance, like a disrespectful step-daddy during a presentation and panel discussion.

  • "I find myself persuaded by [Saez and Zucman’s] critics that the data are substantially inaccurate and substantially misleading."
  • "I used their algorithm on my tax return to figure out my wealth and it was not within a country mile of reality."

The former Treasury Secretary and head of the National Economic Council was far from finished.

  • "I do not think a focus on wealth inequality as a basis for being concerned about a more just society is terribly well designed," Summers continued, noting that he believed Saez and Zucman had overestimated "by a third" the amount of wealth held by American billionaires and that he doubted the tax would deliver "even half of their wealth figure."

Between the lines: Summers seemed to "take it really personally," Saez told Axios after the panel discussion.

Of note: Harvard economist N. Gregory Mankiw, who served in the administration of President George W. Bush presented a 12-minute lecture that lent support to Andrew Yang's universal basic income proposal.

  • "I don't know Andrew Yang at all, so I'm not endorsing him," he told Axios after the event. "But universal basic income, which provides a fairly robust safety net for people at the bottom of the economic ladder, to me makes sense."

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