said Sunday that the Biden administration hasn’t decided whether to pursue a wealth tax, but will likely issue proposals to address the swelling federal budget deficit.
A group of progressive lawmakers including Sen.
(D., Mass.) proposed March 1 a so-called ultra-millionaire tax. The legislation would create a 2% annual tax on the net worth of households and trusts between $50 million and $1 billion and an additional 1% surtax on those above $1 billion.
Asked about the idea on ABC’s “This Week with George Stephanopoulos,” Ms. Yellen said it isn’t something President Biden himself has proposed, but that the administration might consider it.
“That’s something that we haven’t decided yet and can look at,” Ms. Yellen said. She noted that Mr. Biden proposed higher taxes on corporations, on some individuals and on capital gains or dividend payments during his 2020 presidential campaign. “Those are alternatives that address—that are similar in their impact to a wealth tax.”
The U.S. currently has no wealth tax. The federal government currently collects the biggest chunk of its revenue—about half in 2019—from individual income taxes. Those top out at 37% of income above $518,000 per year.
Government efforts to combat the coronavirus pandemic and ensuing economic downturn have included trillions of dollars of extraordinary spending, causing the federal budget deficit to widen and public debt to rise.
The wealth tax proposed by progressive Democrats would generate $3 trillion of revenue over a decade, according to an analysis by University of California, Berkeley, economists
Federal budget deficits from 2022 to 2031 are expected to total $12.27 trillion, the Congressional Budget Office estimates. That figure doesn’t include the Biden administration’s $1.9 trillion stimulus package.
Ms. Yellen said the U.S. government needs to rein in the deficit “in the longer run” and that she expects the Biden administration to take steps to do so.
“Over time, I expect that we will be putting forth proposals to get deficits under control,” Ms. Yellen said.
She said she isn’t losing sleep over the U.S.’s fiscal situation at the moment thanks to low interest rates.
“When I think about the burden of debt, I think about it mainly in terms of the interest payments that the government needs to pay,” Ms. Yellen said. “And in spite of the fact that the debt has increased substantially, interest payments relative to the size of the economy have remained quite low. No higher than they were back in 2007.”
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