Hassett Says 5% Wealth Tax Would Stop Investment, Argues Asset-Building for Poorest Is Social Justice
Summary
- Hassett said the current 30-year US Treasury yield at 5%% means a 5%% wealth tax would be equivalent to taxing all returns generated by capital.
- Hassett said a wealth tax would effectively impose a 100%% tax on capital income and could discourage investment altogether.
- Hassett emphasized expanding Trump accounts and individual retirement accounts (IRAs) to help low-income households build assets, arguing that allowing the bottom 10%% to benefit from compound returns on capital is true social justice.
Forecast Trend Report by Period
Kevin Hassett Says 30-Year US Treasury Yield Is 5%
"A 5% wealth tax would take all returns from capital"
Republican senator says more wealthy residents are moving to Texas to avoid wealth taxes
Kevin Hassett, director of the White House National Economic Council, said at the Milken Global Conference on May 4 that a wealth tax could undermine capital investment and asset-building for low-income Americans.
If the yield on a 30-year US Treasury bond — the risk-free rate — is 5%, then a 5% wealth tax is effectively the same as taking all returns generated by capital in taxes, Hassett said. He compared it to imposing a 100% tax on labor income, arguing that just as people would lose the incentive to work, a wealth tax that effectively taxes capital income at 100% could discourage investment altogether.
Hassett also called for expanding "Trump accounts" and individual retirement accounts, or IRAs, to help lower-income households build assets. He said people with limited financial literacy should still be able to open accounts easily through a simple online platform.
He described the policy vision as a "Rawlsian revolution," based on the theory of justice developed by Harvard philosopher John Rawls. Traditional left-leaning policies focus on redistributing the income of higher earners to the middle class, he said, but true social justice means helping the bottom 10% benefit from the compounding of capital.
US Senator Ted Cruz, a Republican from Texas, also criticized steep wealth taxes such as the "billionaire tax" championed by Democrats.
Cruz said he had repeatedly recommended California Governor Gavin Newsom as Texas's top real estate agent this year because no one in history had sold more Texas homes than Newsom.
The comment was a jab at wealthy residents leaving California for Texas as California seeks to impose high taxes, including a wealth tax.
Park Shin-young, New York correspondent, Hankyung.com, nyusos@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
