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How Much Does the Average American Have in Savings?

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  • The average American household has $175,510 worth of savings in bank accounts and retirement savings accounts as of June 2018.
  • The median American household currently holds about $11,700 across these same types of accounts.
  • The top 1% of households (as measured by income) have an average of $2,495,930 in these various saving accounts. The bottom 20% have an average of $8,720.
  • Roughly 83% of savings are in located in retirement accounts like IRAs and workplace-sponsored retirement savings plans like 401(k)s.
  • Millennials, who have just started their savings journey, have currently socked away an average of $24,820. Gen Xers have $125,560 in retirement savings. Baby boomers and those born before 1946 have an average of $274,910.
  • 29% of households have less than $1,000 in savings.

You often read or hear stories about how Americans aren’t saving enough for college, for retirement, for a rainy day — for anything, really. But how much do they currently have in their bank, credit union or online brokerage?

MagnifyMoney used data from the Federal Reserve and the Federal Deposit Insurance Corp. (FDIC) to estimate the average and median household balances in various types of banking and retirement savings accounts. 2016 household data from the Fed’s Survey of Consumer Finances was adjusted to 2018 levels by using June, 2018 market values and fund flows.
 

Of course, these are very broad numbers, and very few of the 126 million U.S. households will be average. As of 2016, about 78% of households had at least one of the following: a savings account, a retirement savings account, a money market deposit account or certificates of deposit.

Average account balances

As of June 2018, among all households (including those with no account):

  • The average American household savings account balance is $16,420
  • The average American household has $5,170 in certificates of deposits (CDs)
  • The average American household has $9,370 in money market deposit accounts
  • The average American household has $9,750 in checking accounts
  • The average American household has $144,560 in one or more retirement savings accounts, including individual retirement accounts (IRAs), 401(k)s and other types of retirement accounts

 

Note that all households won’t necessarily own each type of savings account. For example, only about 7% of households currently have savings in some type of CD, meaning that the 93% without one will necessarily drive down the average.

Here are the average balances among savers, regardless of the kinds of savings vehicles they use. The averages below only exclude the 22% of households without any of these savings accounts. Households that have some savings vehicles but not necessarily all of the savings vehicles below were factored into each average.

Across all “saver” households:

  • The average savings account balance is $22,469
  • The average money market deposit account balance is $12,823
  • The average amount held in one or more CDs is $7,074
  • The average balance of all retirement accounts is $197,849
  • The average checking account balance is $7,680

 

When you look at the average balances of those who own the particular account, the averages are even higher:

  • 51% of American households have a savings account, and the average balance among them is $32,130
  • 18% have money market deposit accounts, and the average balance is $74,470
  • 7% have one or more CDs and hold a total average $79,240
  • 52% have one or more retirement accounts, and the total average balance is $277,670
  • 83% have checking accounts and the average balance is $11,260

 

Median account balances

Median balances are considerably lower than the averages. For example, the median savings account balance is $4,830, significantly lower than the $32,130 average American savings account balance. Fifty percent of households have more than $4,830 in those types of accounts, while 50% have less. (The median figures below only include households that have that type of account.)

  • The median American household savings account balance is $4,830
  • The median American household money market deposit account balance is $12,600
  • The median American household amount in one or more CDs is $21,000
  • The median retirement account size in American households is $72,840
  • The median American household checking account balance is $2,330

 

Demographics and savings

  •  Who are the above-average saving households? Wealthier households comprise most of them, but less-well heeled households can have healthy levels of savings as well. When you look at households who have saved more than the national average of $175,410, 59 percent of them are top income earners– those households in the top 20 percent of annual income. But 41 percent of above average savers are in the bottom 80% of income.

  • Millennial households have saved an average of less than $25,000, Gen Xers have about $125,000 saved, while baby boomers have saved nearly $275,000.

  • Regardless of income or age, 29% of households have less than $1,000 saved.

When savings is viewed through certain demographic prisms, like age, income and education, the average and median savings account balances start making more sense. For instance, it won’t surprise anyone that households with higher incomes save more than those of more modest means.

 

So although the average American household has saved roughly $175,000 in various types of savings accounts, only the top 10%-20% of earners will likely have savings levels approaching or exceeding that amount. Indeed, and as the chart shows, the bottom 40% of American households are more likely than not to have any savings whatsoever. Conversely, the top 10% of the population by income is likely to have many times the national household savings average.

Similarly, millennials will have saved less than boomers, as the latter has had a 35-year head start, among other factors. Currently, the average boomer has roughly 11 times the amount saved as the average millennial.

 

How much does the average American have in savings for retirement?

Of course, many American households store much of their savings in retirement accounts, like 401(k) plans from their employers and IRAs, both of which are tax-advantaged accounts that can hold not only “liquid” savings but also investments like financial securities and, in some cases, other types of assets like real estate. Fifty-two percent of households have some sort of retirement account, according to a 2016 survey by the Federal Reserve.

Among all households (including those with no account), the average retirement savings account balance as of June 2018 is $144,556.

But among households with an account (about 52% of all households):

  • American households with a retirement account (accounts like employer-sponsored 401(k) plans and IRAs) have an average of $277,670 in such accounts.
  • The median household balance as of June 2018 is $72,840 among those with retirement accounts.

For those households with retirement accounts, here’s how retirement savings break out among the different generations:

  • Millennials have saved an average of $34,030
  • Gen Xers have an average of $165,860 in retirement savings.
  • Baby boomers and those born before 1946 have an average of $380,100 in retirement accounts.

Recent trends in deposit accounts

Here’s a closer look at how customers of banks and credit unions are allocating their deposits:

CDs are losing shares to traditional and money market accounts

The amount of savings in FDIC-insured banks have grown by nearly $4 trillion since the recession.

 

But that growth isn’t going into CDs. There’s nearly $1 trillion less in CDs in 2018 than 10 years ago, while the amount of savings in both traditional and money market deposit accounts has increased by more than $2 trillion in each category.

 

CD yields

As you may suspect, the primary culprit behind declining CD deposits are the accounts’ low yields. As illustrated in the chart below, the popularity of CDs has waned as banks paid relatively little interest for all CDs, even those with longer maturities. For much of the past decade, the average yield for locking up savings in 1-year CD barely exceeded the average yield on a money market account, which is more liquid than a CD.

 

Longer-term CDs haven’t been yielding much more, until recently. Although the Federal Reserve began its most recent series of short-term rate hikes in early 2017, CD yields only started to climb from rock bottom in spring 2018.

 

Credit unions: A smaller pool with slightly better yields

While savings have also increased in the much smaller credit union universe, CD deposits have remained steady.

 

While there are multiple explanations for the steady share of CDs at credit unions, such as the institutions’ not-for-profit status (members are the shareholders), one obvious reason is the competitive rates they offer customers relative to banks. According to the National Credit Union Administration (NCUA) quarterly survey, credit unions offer consistently higher rates on savings than commercial banks.

 

Fortunately, savers (or would-be savers) are not consigned to improving-but-still-meager average savings yields. The best yields for savings accounts, CDs and money market accounts well exceed the average APY by at least one percentage point and often more.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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2019 Fed Meeting Predictions — Fewer Rate Hikes Seem Likely

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We’re nearly three months into 2019 at this point, and the likelihood of more Fed rate hikes this year is diminishing by the day. The outlook has changed markedly from 2018, when the FOMC raised the federal funds rate four times and adjusted to the leadership of Chair Jerome H. Powell. Read on for our predictions for each Fed meeting and updates on what went down in the event.

Our March Fed meeting predictions

There’s little chance of a rate hike this time around. In a policy speech on March 8, Fed Chair Jerome Powell reinforced the FOMC’s patient approach when considering any changes to the current policy, indicating he saw “nothing in the outlook demanding an immediate policy response and particularly given muted inflation pressures.”

This is no different from what we heard back in January, when the Fed took a breather after its December rate hike. There was no change to the federal funds rate at that meeting, and Powell had stressed that the FOMC would be exercising patience throughout 2019, waiting for signs of risk from economic data before making any further policy changes.

Further strengthening the case for rates on hold, the reliably hawkish Boston Fed President Eric Rosengren cited several reasons that “justify a pause in the recent monetary tightening cycle,” in a policy speech on March 5. His big tell was citing the lack of immediate signs of strengthening inflation, which remains around the Fed’s target rate of 2%.

Even though there had been some speculation of a first quarter hike at the March Fed meeting, LendingTree chief economist Tendayi Kapfidze reminds us that the Fed remains, as ever, data-dependent. “The latest data has been on the weaker side, with the exception of wage inflation,” he says.

The economic forecast may be weaker than December’s. The Fed will release their longer-range economic predictions after the March meeting. These projections should include adjustments in the outlook for GDP, unemployment and inflation. The Fed will also provide its forecast for future federal funds rates.

Kapfidze expects we’ll see a weaker forecast this time around than what we saw in December. “I except the GDP forecast to go down, and the federal funds rate expectations to go down.” This follows a December report that posted lower numbers than the September projections.

Despite flagging economic projections, Rosengren offered a steady outlook in his speech. “My view is that the most likely outcome for 2019 is relatively healthy U.S. economic growth,” he said, again attributing this to “inflation very close to Fed policymakers’ 2 percent target and a U.S. labor market that continues to tighten somewhat.”

The Fed’s economic predictions offer clues to its future policy decisions. In September, the Fed projected a 2019 federal funds rate of 3.1%. That number dropped to 2.9% in the December report. With the current rate at 2.25% to 2.5%, there’s still room for more hikes this year. Keep in mind, however, that, the March meeting may narrow projections for the rest of 2019.

As for Kapfidze, he thinks we’ll see a rate hike in the second half of the year. “If wage inflation continues to increase and it trickles more into the economy, the Fed could choose to raise rates due to that risk.”

However, as of March 12, markets see the odds of a rate hike this year at zero, while the odds of a federal funds cut has risen to around 20%, based the Fed Fund futures.

Upcoming Fed meeting dates:

Here is the FOMC’s calendar of scheduled meetings for 2019. Each entry is tentative until confirmed at the meeting proceeding it. For past meetings, click on the dates below to catch up on our pre-game forecast and after-action report.

Our January Fed meeting predictions

Don’t expect a rate hike. The FOMC ended the year with yet another rate hike, raising the federal funds rate from 2.25 to 2.5%. It was the committee’s fourth increase of 2018, which began with a rate of just 1.5%.

But the January Fed meeting will likely be an increase-free one. Tendayi Kapfidze, chief economist at LendingTree, the parent company of MagnifyMoney, said the probability of a rate hike is “basically zero.”

Kapfidze’s assessment is twofold. First, he noted that the Fed typically announces rate increases during the third month of each quarter, not the first. This means a hike announcement would be much more likely during the FOMC’s March 19-20 meeting, rather than in January.

Perhaps more importantly, Kapfidze said there’s been too much market flux for the FOMC to make a new decision on the federal funds rate. He predicts the Fed will likely wait for more evidence before it considers another rate hike.

“I think a lot of it is a reaction to market volatility, and therefore that’s lowered the expectations for federal fund hikes,” Kapfidze said.

But if a rate hike is so unlikely, what should consumers expect from the January Fed meeting? Here are three things to keep an eye on.

#1 The frequency of rate hikes moving forward

It’s unclear when the next increase will occur, but the FOMC’s post-meeting statement could give a clearer picture of how often rate hikes might occur in the future.

The Fed released its latest economic projections last month, which predicted the federal funds rate would likely reach 2.9% by the end of 2019. This figure was a decline from its September 2018 projections, which placed that figure at 3.1%.

As a result, many analysts — Kapfidze included — are forecasting a slower year for rate hikes than in 2018. Kapfdize said some analysts are predicting zero increases, or even a rate decrease, but he believes that may be too conservative.

“I still think the underlying economic data supports at least two rate hikes, maybe even three,” Kapfidze said.

Kapfidze’s outlook falls more in line with the Fed’s current projections, as it would mean two rate hikes of 0.25% at some point this year. There could be more clarity after the January meeting, as the FOMC’s accompanying statement will help indicate whether the Fed’s monetary policy has changed since December.

#2 An economic forecast for 2019

The FOMC’s post-meeting statement always includes a brief assessment of the economy, and this month’s comments will provide a helpful first look at the outlook for 2019.

Consumers will have to wait until March for the Fed’s full projections — those are only updated after every other meeting — but the FOMC will follow its January gathering with its usual press release. This statement normally provides insight into the state of household spending, inflation, the unemployment rate and GDP growth, as well as a prediction of how quickly the economy will grow in the coming months.

At last month’s Fed meeting, the committee found that household spending was continuing to increase, unemployment was remaining low and overall inflation remained near 2%. Kapfidze expects January’s forecast to be fairly similar, as recent market fluctuations might make it difficult for the FOMC to predict any major changes.

Read more: What the Fed Rate Hike Means for Your Investments

“I wouldn’t expect any significant change in the tone compared to December,” Kapfidze said. “I think they’ll want to see a little more data come in, and a little more time pass.”

At the very least, the statement will let consumers know if the Fed is taking a patient approach to its analysis, a decision that may help indicate just how volatile the FOMC considers the economy to be.

#3 A response to the government shutdown

The big mystery entering January’s Fed meeting is the partial government shutdown. While Kapfidze said the FOMC’s outlook should be similar to December, he also warned that things could change quickly if Congress and President Trump can’t agree on a spending bill soon.

“The longer it goes on, and the more contentious it gets, the less confidence consumers have — the less confidence business have. And a lot of that could translate to increased financial market volatility,” Kapfidze said.

Kapfidze added that the longer the government stays closed, the more likely the FOMC is to react with a change in monetary policy. During the October 2013 shutdown, for example, the Fed’s Board of Governors released a statement encouraging banks and credit unions to allow consumers a chance at renegotiating debt payments, such as mortgages, student loans and credit cards.

“The agencies encourage financial institutions to consider prudent workout arrangements that increase the potential for creditworthy borrowers to meet their obligations,” the 2013 statement said.

What happened at the January Fed meeting:

No rate hike for now

In its first meeting of 2019, the Federal Open Market Committee announced it was keeping the federal fund rate at 2.25% to 2.5%, therefore not raising the rates, as widely predicted. This decision follows much speculation surrounding the economy after the Fed rate hike in December 2018, which was the fourth rate hike last year. In its press release, the FOMC cited the near-ideal inflation rate of 2%, strong job growth and low unemployment as reasons for leaving the rate unchanged.

In the post-meeting press conference, Federal Reserve Chairman Jerome Powell confirmed that the committee feels that its current policy is appropriate and will adopt a “wait-and-see approach” in regards to future policy changes.

Read more: How Fed Rate Hikes Change Borrowing and Savings Rates

Impact of government shutdown is yet to be seen

The FOMC’s official statement did not address the government shutdown in detail, although it was discussed briefly in the press conference that followed. Powell said he believes that any GDP lost due to the shutdown will be regained in the second quarter, providing there isn’t another shutdown. Any permanent effect would come from another shutdown, but he did not answer how a shutdown might change future policy.

What the January meeting bodes for the rest of the year

Don’t expect more rate hikes. As for what this decision might signal for the future, Powell maintains that the committee is “data dependent”. This data includes labor market conditions, inflation pressures and expectations and price stability. He stressed that they will remain patient while continuing to look at financial developments both abroad and at home. These factors will help determine when a rate adjustment would be appropriate, if at all. When asked whether a rate change would mean an increase or a decrease, he emphasized again the use of this data for clarification on any changes. Still, the Fed did predict in December that the federal funds rate could reach 2.9% by the end of this year, indicating a positive change rather than a negative one.

CD’s might start looking better. For conservative savers wondering whether or not it’s worth it to tie up funds in CDs and risk missing out on future rate hikes – long-term CDs are looking like a safer and safer bet, according to Ken Tumin, founder of DepositAccounts.com, another LendingTree-owned site. Post-Fed meeting, Tumin wrote in his outlook, “I can’t say for sure, but it’s beginning to look more likely that we have already passed the rate peak of this cycle. It may be time to start moving money into long-term CDs.”

Look out for March. Depending on who you ask, the FOMC’s inaction was to be expected. As Tendayi Kapfidze, LendingTree’s chief economist, noted [below], if there is going to be a rate increase this quarter, it will be announced in the FOMC’s March meeting. We will also have to wait for the March meeting to get the Fed’s full economic projections. For now, its statement confirms that household spending is still on an incline, inflation remains under control and unemployment is low. It also notes that growth of business fixed investment has slowed down from last year. As for inflation, market-based measures have decreased in recent months, but survey-based measures of longer-term inflation expectations haven’t changed much.

 

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Learn more: What is the Federal Open Market Committee?

The FOMC is one of two monetary policy-controlling bodies within the Federal Reserve. While the Fed’s Board of Governors oversees the discount rate and reserve requirements, the FOMC is responsible for open market operations, which are defined as the purchase and sale of securities by a central bank.

Most importantly, the committee controls the federal funds rate, which is the interest rate at which banks and credit unions can lend reserve balances to other banks and credit unions.

The committee has eight scheduled meetings each year, during which its members assess the current economic environment and make decisions about national monetary policy — including whether it will institute new rate hikes.

A look back at 2018

Before the FOMC gathers this January, it’s worth understanding what the Fed did in 2018, and how those decisions might affect future policy.

The year 2018 was the Fed’s most aggressive rate-raising year in a decade. The FOMC’s four rate hikes were the most since the 2008 Financial Crisis, after the funds rate stayed at nearly zero for seven years. This approach was largely based on the the FOMC’s economic projections, which found that from 2017 to 2018 GDP grew, unemployment declined and inflation its Fed-preferred rate of 2%.

In addition to the rate hikes, the FOMC also continued to implement its balance sheet normalization program, through which the Fed is aiming to reduce its securities holdings.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Dillon Thompson is a writer at MagnifyMoney. You can email Dillon here

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Election 2020: What’s a Wealth Tax?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

With the 2020 presidential race well underway, Democratic candidates and policymakers have begun present their ideas on how to remedy what they perceive is a tax code that favors America’s wealthiest citizens. Taxing the uber-rich has long been an initiative supported by progressives, and it was amplified in the wake of last year’s sweeping tax reform, which cut taxes for the wealthy and corporations alike.

Some plans have come in the form of structured formal policy proposals (see Elizabeth Warren’s Ultra-Millionaire Tax) drafted with the help of economics professors, while others have made headlines based on comments in nationally-televised interviews (a la Alexandria Ocasio-Cortez’s 70% income tax idea). If Democrats can pull off a win in 2020, these early proposals could offer insight into what might be in store for the tax code.

All of the jargon and acronyms surrounding the subject of new taxes can obscure exactly what presidential hopefuls and pundits are proposing. Check out the table below to understand the basics of what’s currently being discussed, as well as ideas that were under consideration in the not-too-distant past.

Ultra-Millionaire Tax70% Income TaxFor the 99.8% ActPaying a Fair Share Act of 2012
Championed by: Sen. Elizabeth WarrenChampioned by: Rep. Alexandria Ocasio-CortezChampioned by: Sen. Bernie SandersChampioned by: Sen. Sheldon Whitehouse, Warren Buffett and President Barack Obama
Details: This would tax a household's net-worth between $50 million and $1 billion at 2% every year, and any net worth over $1 billion at an additional 1%.Details: Any income earned over $10 million would be taxed as much as 70%.Details: This bill introduces a progressive taxation structure to the estate tax, starting with estates valued at $3.5 million — much lower than the current $11.4 million.Details: A piece of legislation inspired by the so-called “Buffett Rule” and supported by President Obama, this act would ensure anyone earning more than $1 million would have to pay a minimum tax rate of 30%.
Status: This is only a policy proposal by the Warren campaign and hasn't been taken up by the Senate.Status: There's been no official policy proposal from Rep. Ocasio-Cortez.Status: No vote has been taken on this piece of legislation.Status: The bill was introduced in the Senate in March 2012, but failed to proceed. It has been reintroduced several times, as recently as 2017, but has not been enacted.

It’s clear that while there are many ways of skinning a cat, the basic differences between the proposals lie in what exactly is being taxed. Most Americans probably understand the basic definition of an income tax, but things get more complex when discussing taxation of net worth and wealth.

How to tax the rich: Net worth, estates or income?

When experts and politicians discuss a wealth tax, they almost always mean a tax on net worth. If you own a business and private assets worth a total of $100 million, but you also carry $75 million in liabilities (such as debt), then your net worth — aka your wealth — is $25 million.

What makes a potential wealth tax, like the one Sen. Warren has proposed, so unusual is that it targets the passive wealth of an individual. Most taxes levied in America involve some sort of transaction — whether it’s a tax on the income you earn from a job, a sales tax you pay at a point of sale, a capital gains tax on a stock sold, or even an inheritance tax you pay when you take possession of an estate. With a wealth tax, no transaction need happen for the tax to be levied. There’s no hiding from the IRS — they’ll be coming for that collection of Van Goghs, whether you sell them or not.

Simply put, wealth is any asset an individual possesses that has monetary value. Some examples include:

  • Property, like a house or land
  • Bank accounts
  • Any businesses owned
  • Stocks and bonds
  • Private assets, such as art, a Lamborghini collection, diamonds, etc.

Bernie Sanders’ proposal would tax the wealthy on their estates. Estates worth between $3.5 million and $10 million would be taxed at 45% of the estate’s value, with the tax climbing as the value of the estate grows, reaching a peak of 77% of any estate worth $1 billion or more.

To demonstrate how much money his bill would raise, Sanders assumes the net worth of Jeff Bezos at $131.9 billion and claims the Amazon CEO would have a maximum tax liability of $101.3 billion on his estate under his legislation — almost $49 billion more than Bezos would owe under the current law.

Who would have to pay a new wealth tax?

It’s impossible to predict what a hypothetical wealth tax would actually look like after surviving the legislative process needed to make the new tax law.

“In terms of what’s taxed, it’s whatever Congress wants,” said Howard Gleckman, senior fellow at the Tax Policy Center, a nonpartisan think tank based in Washington, D.C.

Even with the candidate proposals out now, there’s no certainty that their campaign proposals would actual survive a battle in Congress. Hypothetically, however, the wealth tax championed by Sen. Warren would apply to individuals with a net worth of $50 million (with an additional tax for those with a net worth of $1 billion and more). If her “Ultra-Millionaire Tax” passed as currently proposed, the results would be:

  • a 2% annual tax on household net wealth between $50 million and $1 billion
  • an additional 1% annual tax on household net wealth greater than $1 billion

An analysis of Sen. Warren’s wealth tax by Emmanuel Saez and Gabriel Zucman, both economics professors at the University of California, Berkeley, estimates it would directly affect only 75,000 households and raise $2.75 trillion over the course of 10 years.

What are the arguments for a wealth tax?

With Democratic leaders advancing ambitious and expensive new policy programs, from the New Green Deal to a national single-payer healthcare system, a wealth tax on America’s richest citizens is seen by some as necessary to raise the revenue needed to fund these sweeping initiatives.

Sen. Warren, for instance, recently unveiled a plan to help provide child care and early education for every American family. The Universal Child Care and Early Learning Act would guarantee “that every family, regardless of their income or employment, can access high-quality, affordable child care options for their children from birth to school entry” and would cost the federal government $70 billion every year, according to an analysis by Moody’s Analytics. The senator’s document states the revenue raised by her proposed wealth tax would more than cover the cost of universal child care.

Rep. Ocasio-Cortez also swings for the fences with the New Green Deal resolution she introduced to Congress, which tasks the federal government with “eliminating pollution and greenhouse gas emissions as much as technologically feasible” and “meeting 100 percent of the power demand in the United States through clean, renewable and zero-emission energy sources,” among other things. When asked about the practicalities of meeting these goals in an interview on 60 Minutes, the freshman congresswoman stated that “people are going to have to start paying their fair share in taxes.”

What are the arguments against a wealth tax?

Assessment and enforcement. One of the biggest concerns critics have of a possible wealth tax is how it can be assessed and enforced. Determining the wealth of the individual isn’t as easy as asking Alexa “How rich is Jeff Bezos?” and then sending him a bill. The IRS will have to dedicate significant resources to evaluating the value of a taxpayer’s private assets and businesses owned, a challenge Sen. Warren’s online explanation of her wealth tax proposes solving with the tightening of loopholes in the current tax code and increasing the IRS’s enforcement budget. The proposed tax also includes a one-time 40% tax on wealth above $50 million of any citizen renouncing their citizenship to flee to more tax-friendly countries.

But that kind of bureaucratic expansion runs counter to how policymakers have traditionally viewed the role of the IRS. According to Gleckman, for decades, “all of the pressure has been on reducing IRS staff and limiting its ability to do audits.”

“What’s striking about it,” he continued, “is it doesn’t seem to matter whether the Democrats are in charge or the Republicans — there’s very few politicians who are ever interested in giving more resources to the IRS.”

A drain on the job creators. Another argument that some wealth tax advance skeptics have is that wildly successful entrepreneurs won’t want to invest in their businesses (which would be considered as part of their wealth) and the economy would lose out on the new jobs that investment would create.

“The job creator argument is not entirely specious,” said Gleckman. “You have created, at least on the margin, a modest disincentive for very wealthy Americans to invest [in their businesses] and maybe created an incentive for them to invest outside of the United States.”

The bottom line on the wealth tax

The wealth tax’s current 15 minutes of fame may provide plenty of red meat for politicians and pundits to chew over as the 2020 election season ramps up, but none of the proposed ideas would affect the taxes for the vast majority of Americans. Even if you do have more than $50 million in wealth or are earning more than $10 million in income each year, it’s extremely unlikely any proposed tax under discussion would be passed by Congress and signed into law without significant additions and changes, so there’s no sense worrying about what currently amounts to a campaign talking point.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

James Ellis
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James Ellis is a writer at MagnifyMoney. You can email James here

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