Democratic presidential candidate Elizabeth Warren’s proposed wealth tax would cost President Trump an estimated $145 million a year, a devastating sum for a man with a relatively modest amount of cash.
Warren, for one, doesn’t seem concerned. Yesterday, after Bill Gates referred to nonexistent proposals that suggest he should pay $100 billion (Warren’s plan would actually cost the Microsoft cofounder approximately $6.4 billion per year), the Warren campaign shared a calculator to let billionaires know how much they would pay in annual taxes under the proposal.
Entering Trump’s $3.1 billion net worth into the calculator, the program spits out a pre-programmed message. “Wow — you’ve got a lot of money!” it says. “Now you have the opportunity to invest some of it back into our society so everyone has a chance to succeed. You’d pay $145 million next year under Elizabeth’s wealth tax. This amount, which you likely won’t even feel, will help us invest in education from birth through college and help finance health care for everyone.”
Trump, however, would definitely feel the hit. The president’s fortune is not one giant pile of cash. It’s a set of assets—commercial buildings, mansions, hotels, private planes and golf courses. Forbes estimates the president has just $160 million in cash and liquid assets. In order to pay just one year of wealth taxes, according to our figures, Trump would theoretically have to sell assets, take on additional debt or clear out nearly all his cash.
Under Warren’s plan, billionaires would owe nothing on their first $50 million, 2% on the next $950 million and 6% on everything over $1 billion.
For Trump’s business, a single $145 million bill would be tough, but an annual one would be crippling. If Trump paid the first year of taxes out of his cash accounts, it seems certain he would have to leverage or sell some assets to satisfy the tax demand in later years.
Not to worry, insists Warren’s pre-programmed calculator. “If history is any guide, if you do nothing other than invest your wealth in the stock market, it’s likely that your wealth will continue to grow.”
It’s true that S&P 500 has grown at an average annual rate of roughly 10% over the last 30 years, enough to outpace a 6% wealth tax. But most billionaires don’t have their fortunes invested in a diversified stock portfolio like the S&P 500. They generally get rich by investing in one company and betting the house on it. If business goes well, they make a fortune. If it doesn’t, they can lose billions. They tend to have a chunk of cash on the side, but as a percentage of their overall net worth, it’s usually relatively small.
In addition, their fortunes often don’t keep up with the S&P 500. Trump, for instance, reappeared in Forbes’ billionaire rankings in 1997 after an eight-year hiatus, with an estimated net worth of $1.4 billion. In the 22 years since, he has added $1.7 billion, meaning his initial $1.4 billion produced a compound annual return of 3.7%. Mediocre returns like that wouldn’t be enough to keep pace with Warren’s taxes.
Then again, maybe Trump would not end up paying the full tab. Like a lot of billionaires, he’s been finding ways to get around federal taxes for decades.