Democratic presidential candidates Sen. Elizabeth Warren and Sen. Bernie Sanders both include in their campaign platforms that they would impose higher taxes on the rich through wealth tax proposals.
MIT Economist Jonathan Gruber joined Boston Public Radio on Monday to break down what a wealth tax is, who it would impact, and how U.S. tax policies could generally be more equitable.
"It's very important to remember the difference between wealth tax and income tax," he said. "An income tax is a tax on your flow of income as you earn it, so as you earn money, you're taxed on it. A wealth tax is like a property tax on your house, it's a tax on how much you have at a point in time."
Warren and Sanders's proposals are "pretty similar," according to Gruber: They're both marginal taxes on every dollar above a certain dollar amount.
Sanders' is more aggressive, starting at a 1 percent tax on any additional wealth above $32 million, going all the way to an 8 percent tax on additional money over $100 billion. Warren levies her first wealth tax at 2 percent on any dollar above $50 million.
"It would be something like .2 percent of families. It's a really small percent of people" that would be affected by either wealth tax, said Gruber.
Gruber said "most mainstream economists think we need to have a more progressive tax system," but he advocated for using the wealth tax after existing tax policies are strengthened, like making the estate tax more robust and eliminating the capital gains loophole that allows certain income to be taxed at a lower rate.
Jonathan Gruber is Ford Professor of Economics at MIT. He was instrumental in creating both the Massachusetts health-care reform and the Affordable Care Act. His latest book is "Jump-Starting America, How Breakthrough Science Can Revive Economic Growth and the American Dream."
