Wealthy preparing to vote with their feet

David Lesperance writes about the potential impact of the 2020 presidential election on American wealth.

The November election is clearly a ‘jump ball’ not only for POTUS but also the down-ticket senators, representatives and governors.

But we do know that all of the Democratic candidates have now announced their tax proposals. Therefore, we know that should the Democrats win the Presidency and both houses, at a minimum there will be a doubling of capital gains rates (Biden, Buttigeig, Bloomberg). If the progressive wing wins out, there is also the distinct possibility of a Wealth Tax (Sanders / Warren). This would mean increased estate taxes, and a major jump in the ordinary income rates.

When faced with these questions, I ask my clients to consider how they would deal with the threat of a wildfire. Automatically their response is that they have purchased home insurance and worked out a fire escape plan. They do not do this because they think there is a more than a high PROBABILITY that they will have a fire. Rather, they understand that fire is a POSSIBILITY. If it were to occur when they do not have insurance and an escape plan, the impact would be devastating. I then tell them to apply this same logic to their family’s wealth. There are the numerous uncertainties arising from the upcoming election. I suggest that they shouldn’t let their party allegiance, candidate preference or overly optimistic predictions blind them. Logically they should plan for all possible outcomes. …

… Americans are free to elect politicians who propose Tax the Rich policies such as a Wealth Tax or taxing capital gains at ordinary tax rates. Likewise, wealthy Americans have the freedom to sever their future tax obligations. The US public, however, should be aware before casting their next votes of the consequence of departures of wealthy Americans. The reality is that this will result in the US Treasury will receiving significantly less tax revenue.

If this sounds alarmist, it is not. This is exactly what happened in every country, like France, which tried to bring in Wealth Taxes or other Tax the Rich policies. Indeed, the US is even more vulnerable than most of these countries. This is because they had VAT tax revenues to reduce their over-reliance on personal tax revenues.

Mitch Kokai / Senior Political Analyst

Mitch Kokai is senior political analyst for the John Locke Foundation. He joined JLF in December 2005 as director of communications. That followed more than four years as chie...