Elizabeth Warren's Budget Math Still Doesn't Work
On the campaign trail, Sen. Elizabeth Warren (D–Mass.) is promising voters that she " has a plan for that "—no matter what "that" is.
But her plans don't add up.
Take Warren's appearance last week on The View , where she overestimated the number of programs she could fund with her proposed wealth tax of 2 percent on personal net worth over $50 million dollars and 3 percent on net worth over $1 billion. Warren name-checked her student loan forgiveness and tuition-free college plan, her childcare plan, and a proposal to increase teacher pay as programs she'd fund with the wealth tax.
According to University of California, Berkeley economists Emmanuel Saez and Gabriel Zucman, Warren's wealth tax would raise $2.75 trillion dollars over the next decade.
Warren's student loan forgiveness and tuition-free college plan would forgive up to $50,000 in student debt owed by households who earn less than $100,000 in income while offering smaller student debt forgiveness to households earning between $100,000 and $250,000. The plan also would make every public two-year and four-year college in the country tuition-free, increase Pell Grant funding by $100 billion, and create a fund to support historically black colleges and universities (HBCUs). Combined, this plan would cost $1.25 trillion over the next decade.
Warren's child-care plan has several planks: providing universal pre-K, funding childcare for all, and raising childcare worker wages. Specifically, the plan would have the federal government work with state and local governments to create a network of free child care centers, preschool, and in-home care options, while raising child care worker wages to those of comparable public school teachers. This combination of proposals will cost roughly $1.7 trillion over the next decade, according to an analysis from Moody's.
Warren also mentioned a plan to raise teacher pay on top of these other proposals. The Massachusetts senator hasn't released a policy on raising teacher pay specifically, so let's instead look at plans from fellow Democratic candidates Julian Castro and Sen. Kamala Harris (D–Calif.). Harris's plan to raise average annual teacher pay by $13,500 would cost $315 billion over the next 10 years, according to the Harris campaign. I reached out to the Warren campaign to see if they had a cost estimate for their teacher pay plan, but the campaign has yet to respond. I will update this post if the campaign gets back to me, and in the meantime, I used $315 billion as an approximation.
Taken altogether, Warren's proposals would cost $3.265 trillion* over the next decade, compared to the $2.75 trillion raised by the wealth tax. That means a wealth tax isn't enough to fund these programs. But that's a common theme among Democratic policy proposals released thus far. Sen. Bernie Sanders (I–Vt.) offered $15 trillion in tax increases to fund Medicare for All, which is estimated to cost $32 trillion . And it's not just Democrats: Republicans passed a roughly $1.5 trillion dollar tax cut without any compensating spending cuts.
What's more, economists have questioned whether $2.75 trillion is an accurate estimate of wealth tax revenue. Former Clinton administration Treasury Secretary Larry Summers called into question Saez and Zucman's estimate, arguing that they dramatically underestimate the enforcement problems with a wealth tax, and said the tax might raise only 40 percent of that projection. The University of Chicago Booth School of Business polled economic experts and found that 73 percent either agreed or strongly agreed that the wealth tax would pose significantly more enforcement challenges than existing taxes due to difficulties of measuring net worth.
European countries have moved away from wealth taxes—12 countries had wealth taxes in 1990, while only four did by 2017. Before those taxes were abolished, they played a minimal role in revenue generation. These countries recognized that the wealth tax poses real economic problems. They treat personal wealth, like a mansion, the same as productive business investments like factories or tools, which impedes both enforcement and economic growth.
The bottom line is that Warren can't pay for all the things she's promising.
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