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These Are the Best U.S. Cities for Working Women in 2019

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.

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Women made history in the 2018 midterm elections, running for and winning offices by record numbers, making it the “Year of the Woman” according to Brookings. The number of state legislature offices held by women rose from 25% in 2018 to 29% in 2019, per the Center for American Women and Politics, an encouraging sign for the future of working women. With more women in office, it’s more likely that issues centering on women in the workforce will get the attention they deserve.

And they do deserve attention. Despite women’s higher educational attainment, the rate at which  women are participating in the workforce has plateaued, as have their wages. Women’s average earnings were still almost 82% of men’s in 2017, the most recent year available from the Bureau of Labor Statistics.

But the picture for working women can look brighter (or bleaker) depending on where they live. For the second year in a row, to find the best places to be a working woman, MagnifyMoney analyzed and ranked the 50 largest U.S. metros.

Key takeaways

  • Washington, D.C., once again holds the top spot with an overall score of 74.
  • Seattle jumped from sixth place to second, with an overall score of 66.2.  This is because the state of Washington created a family leave insurance plan that allows workers to receive at least partial pay when they use their Family Medical Leave Act (FMLA) time starting in 2020. FMLA is used as a stand-in for maternity leave by many American women. Under federal law, employers can’t fire workers for taking up to 12 weeks off for qualifying events, but employers do not have to pay workers for that time.
  • Charlotte, N.C., dropped to the lowest spot on our list, with an overall score of 32.1. Women are underrepresented in leadership roles there, both in business and in government.
  • Detroit came in second to last, with a final score of 33.5, thanks mostly to high unemployment and a wide gender pay gap.
  • Twenty-seven states offer no protections to workers who are pregnant or who have children. This is unchanged from last year, although some states with existing protection — such as Massachusetts, Washington and New York — as well as the District of Columbia expanded their benefits. Only 22 states have some kind of pregnancy accommodation laws, and some of those are scant.
  • These protections are nonexistent in six of the bottom-ranking 10 cities: Detroit, Memphis, Birmingham, Miami, New Orleans and Cleveland.

The 10 best U.S. metros for working women

The map and table above show the 10 cities that offer working women have the most equitable compensations and most opportunities for career advancement. Four of these cities are located on the Pacific Coast, with three of those in California. Neighboring cities Baltimore and Washington, D.C., and Boston and Providence have spots in the top 10.

Here’s a closer look at how these cities rank on different factors.

The nation’s capital is tops again.

Washington, D.C. is the best place overall for working women. It has the highest percentage of managerial positions in its workforce filled by women, at 43.9%, of any city. Boston, Providence, R.I., and Sacramento, Calif. were the other top 10 cities with high rates of women leadership in management positions, at just over 43% each.

D.C. also has some of the strongest parental and pregnancy leave policies of the 50 cities surveyed, second only to Boston. Of the top 10 cities, Washington is where child care is the most affordable, costing an average 19.9% of women’s median earnings.

Seattle is friendly to female entrepreneurs, as the U.S. city with the highest number of women-owned business, at 39.7%. San Diego is the other top 10 city with a high 35.8% rate of businesses owned by women. The West Coast, in general, is a place where women entrepreneurs are succeeding.

Western states welcome new legislators.

While Las Vegas had the highest number of female legislators of any city surveyed — Nevada is the only state where women hold a slightly majority in the state legislature (50.8%) — it didn’t crack the top 10 due to relatively high unemployment and low parental protection rates. Of the cities that did, Denver and Seattle have the highest numbers of women holding state legislative positions, at 46% and 40.8% respectively. Women in Colorado hold a majority in the state’s lower house.

The 2018 midterm election brought more women into statewide office, an encouraging sign for the future of working women. Across the country, the share of women who hold state office rose from just 25% in 2018 to 29% in 2019 — the highest in history. Mississippi had the lowest representation rate in the country at just under 14%, but none of its cities are big enough to make it on our list. That distinction falls to Memphis and Nashville, Tenn., where only 15% of state lawmakers are women.

Minneapolis has the lowest unemployment rate

No. 4 Minneapolis has a 3.6% unemployment rate, the lowest among all 50 cities surveyed and well below the U.S. average of 4% in January. Denver, where just 4.2% of women in the labor force are unemployed, is the other top 10 city scoring well on this factor.

L.A. once again has the lowest wage gap.

Then there’s the earnings gap between men and women, which is the lowest in
Los Angeles at just 11.2%. However, LA was not one of the top 10 cities — it came in at No. 21 overall. Two other California cities had the smallest gap in earnings by gender. San Diego women earn just 12.4% less than men, and Sacramento women earn 13.7% less.

Child care is costliest in Boston.

Despite landing in the top 10 cities for working women, Boston is where child care is the most costly with day care costs equal to 27.4% of median earnings among women.

But on the brighter side, Boston and Minneapolis are the two cities where more women receive employer-sponsored health insurance benefits. In Minneapolis, 71.4% of working women received health insurance coverage through an employer, as do 70.5% of women in Boston.

The 10 worst U.S. metros for working women

Of the 10 cities that offer women the least favorable economic conditions, public policies, and leadership opportunities, most are concentrated in the South. Specifically, seven of the 10 are in Southern states:

  • Charlotte, N.C.
  • Memphis, Tenn.
  • Birmingham, Ala.
  • Miami
  • New Orleans
  • Oklahoma City
  • Houston

Of the remaining worst cities for working women, Detroit and Cleveland are located in the Midwest. Salt Lake City, Utah is the sole western city among these 10.

Here are some details on how these cities ranked on specific factors.

Tennessee lags in female representation.

Tennessee has one of the lowest percentage of state legislative offices filled by women, at 15.2% — affecting Memphis’ rank among the 10 worst cities. New Orleans and Birmingham also had low rates of female representation in their state legislatures. One bright spot for Birmingham:  Of all 50 cities surveyed, the lowest child care costs relative to women’s median earnings were in Birmingham, Ala.

Houston has the lowest percentage of women in management positions of all 50 cities surveyed, at just 35.9%. It’s followed closely by Salt Lake City, where just 36.2% of managers are women, and Oklahoma City at 38.1%.

Women are least likely to own business in Buffalo, N.Y. It’s not among the 10 worst cities for working women, but in Buffalo just 23.7% of business have female owners. Birmingham is a bottom 10 city that’s nearly as bad on this measure, with just 23.9% of businesses owned by women.

Unemployment rates soar in southern California.

Riverside, Calif., near Los Angeles, had the highest unemployment rate among female workers, at 9.5%. Of the 10 bottom-ranked cities, Memphis and Detroit are close behind with respective unemployment rates of 7.9% and 7.5% among women.

Wage gaps span the map.

New Orleans has the widest gap in earnings between men and women of all 50 cities (tied with San Jose). In both cities, women’s median earnings are 26.6% lower than men’s earnings, but the Big Easy is also weighed down by low rates of female representation in the state legislature and parental protections. Salt Lake City nearly matches New Orleans and San Jose with a pay gap of 26.5% between men and women working there. Detroit also has wide gender pay gap that means female workers earn 25.9% less than their male peers.

Women working in Miami are the least likely to receive health coverage through their employers. Less than half (49%) of Miami’s women have employer-based health insurance.

Charlotte drops three spots.

Already in the No. 47 spot last year, Charlotte, N.C. drops to last place in this year’s rankings. Women have nearly nonexistent parental protections here and among the 10 worst cities, Charlotte women pay the most in child care. They see 26.5% of their paychecks eaten up by child care costs, on average.

Full rankings: Where the largest 50 U.S. metros fit in

The map and list above provides a full overview of where each of the 50 largest U.S. cities rank. Check to see if your city is among the place friendly for working women, or a spot where they’ll have the hardest time getting ahead.

4 tips for modern working women

The results of our rankings show that while working women are doing better in some places than others, they’re still far from achieving parity with working men.

While it’s more difficult for women to change the working conditions and equality in their cities (or lack of it), they can still take steps to make sure they’re getting ahead at the office. Here’s how women can stand out at work and advance their career — and pay — more quickly.

  • Seek assignments that will get you noticed. Women are more likely to be assigned “office housework,” administrative tasks that keep a workplace running smoothly but won’t get them noticed. To position yourself for a raise or promotion, volunteer and ask for more high-profile assignments tied to important business or revenue goals. And don’t be shy about pushing back if you’re assigned mundane duties and tasks; it’s reasonable to request that these be fairly shared among all workers.
  • Find a mentor or ally at work. Look around your workplace to find the people who are in the positions you’d like to move into as you advance your career. See if these people are willing to mentor you — this can be especially beneficial if they are also women. Women can also seek mentorship, feedback and support for your professional growth from your direct manager. Lastly, you can ask for help and give support to your female peers, making sure your workplace is somewhere that women’s contributions are noticed, recognized and rewarded.
  • Balance work with personal responsibilities. The expectations often put on women outside the office can affect performance at work, especially for working mothers. While having children tends to have minimal effect on men’s careers, it might even give their paychecks a boost. For women, motherhood is often a professional setback. Society tells women they can “have it all,” but maybe the message should include “just not all at once”. Get clear on your priorities in life and how your job fits into that, and you can more easily identify when it makes sense to go full-steam at work and when to back off.
  • Manage your finances carefully. Although they have lower earnings compared to men, working women can help compensate for this by making wise money choices. Women have more student loans than men, for instance, so prioritizing paying down this and other debt is a first step to start catching up. Women also tend to have lower retirement savings than men, so make this a focus as well. Take full advantage of any employer match you get for retirement contributions. After that, continue to slowly increase contributions and use raises to boost your retirement savings rates.

Building a career and financial foundation that works for you won’t happen overnight. But following these tips, working on your professional skills, and developing solid money habits can go a long way.

Methodology

Each of the 50 largest metropolitan statistical areas (“MSAs”) was ranked against each other, on a 100-point scale, based on eight factors relevant to women’s ability to achieve financial and professional success. The final score for each MSA is the average of points assigned for each metric, and those points are assigned based on where the metro falls between the highest and lowest values for all metros.

The eight factors are:

  • Employment. The percent of women who are unemployed, as reported in the American Community Survey 2017 (five-year estimate) from the U.S. Census Bureau (“2017 ACS”).
  • Health care. The percent of women between the ages of 18 and 64 (inclusive) who have employer-based health insurance, as reported by the 2017 ACS.
  • Business ownership. Percent of businesses with employees that are owned, either wholly or equally, by women, derived from the 2016 Annual Survey of Entrepreneurs from the U.S. Census Bureau.
  • Management positions. Percent of people in management occupations who are women, derived from the 2017 ACS.
  • Wage gap. Gap, as a percent, between median earnings of men and women, derived from the 2017 ACS.
  • Child care. The average cost of in-center child care, as a percent of median earnings for women. Day care costs were reported in The Care Index from New America and Care.com, and median earnings were reported by the 2017 ACS.
  • Representation. The percent of elected state (or district) legislators who are women, as reported by the Center for American Women and Politics at Rutgers University’s Eagleton Institute of Politics.
  • Workplace protections. State pregnancy and parental workplace protections were scored on the following bases. The highest possible score was 100 points and the lowest was zero. The highest actual score was 57 and the lowest actual score was zero.
    • Paid leave: The number of paid parental leave weeks covered by the state, divided by a maximum of 12 weeks, up to 50 points.  Data was reported by the National Partnership for Women & Families.
    • Pregnancy accommodation protections: Each MSA was granted points based on six factors reported by the National Partnership for Women & Families, for a possible total of 30 points, for the following:
      • The existence of such a law
      • If the law covers both public and private employees
      • If the law covers all employers, regardless of employer size
      • If the law doesn’t specify medical documentation for accommodations
      • If the law doesn’t include an “undue hardship” exemption for employers
      • If the law expressly extends protections for issues related to breastfeeding
    • Allowable time off to attend school events: The number of hours spent at a child’s school, per year, for which a parent cannot be fired, divided by a maximum of 40 hours, up to 20 points.  Data was reported by workplacefairness.org.

For the sake of clarity, each metro name is the first city and state listed in the MSA title, which we understand to be the most populous component of each MSA. The Care Index (child care costs) refers to Norfolk, Va., which we associate with the Virginia Beach MSA.

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

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.

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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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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 Warren Championed 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.

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James Ellis
James Ellis |

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

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