(Bloomberg) --Before Elizabeth Warren’s wealth tax, there was Donald Trump’s wealth tax.
It was 1999, and he was trying to get the Reform Party to run him as their presidential candidate for the 2000 campaign.
Although Trump conducted a media blitz to get the wealth tax idea on the front pages, nobody could figure how it worked, why he proposed it or whose idea it was. It might have originated with Trump, or maybe it originated with longtime Trump campaign adviser Roger Stone, says Dave Shiflett, who co-authored a book with Trump.
The math just didn’t add up: Trump was off by trillions of dollars.
By the time he actually ran in 2016, he had re-purposed himself as a market-driven conservative to win the Republican nomination, and ultimately, the White House. The billionaire candidate said in 2016 that he tried to pay as little tax as possible, and since then has generally compared Democrats’ tax-the-rich plans to the socialist regime of Nicolas Maduro in Venezuela.
Shiflett, who co-wrote Trump’s 2000 book “The America We Deserve,” thinks Stone probably came up with the idea, but mostly finds it amusing that anyone takes the proposal that appeared in the book seriously.
In 1999, Trump ran a brief campaign for the nomination of the Reform Party. He was attempting to emulate the success of Jesse Ventura, a former professional wrestler who had won election as governor of Minnesota on the Reform ticket. Yet people close to the Reform Party’s founder, Ross Perot, thought a Trump candidacy was a bad idea. ( Pat Buchanan, the conservative columnist, became the party’s nominee in the 2000 election.)
In November 1999, seeking to make a splash, Trump rolled out his wealth-tax plan in a series of interviews. The idea, according to Trump, was to take a chunk of the wealth of the richest Americans, use it to pay off the national debt, and then use the savings to shore up Social Security, implement a middle-class tax cut and eliminate the estate tax.
Warren, a Massachusetts senator running for the 2020 Democratic nomination, has proposed a wealth tax on those with a net worth of more than $50 million, the top 0.1 percent of Americans. She says the tax would raise $2.75 trillion over 10 years.
Pat Choate, Perot’s running mate in 1996, said Trump’s goal of paying off the national debt was in line with the politics of the time. Perot himself had run in part on the idea of fiscal responsibility. But in 1999, using a wealth tax to pay off the debt seemed to address a problem that was already fading.
The U.S. was turning a surplus at the time, leading Federal Reserve Chairman Alan Greenspan to warn Congress of negative consequences should liquidity in the Treasury bond market dry up.
Compounding the confusion: Trump’s figures didn’t add up. He proposed a 14.25 percent tax on the net worth of Americans who had wealth of more than $10 million, excluding their primary homes. He said the plan would raise $5.7 trillion.
Trump said at the time that “economists I’ve consulted” estimated American wealth at $50 trillion, with $40 trillion of that being controlled by the top 1 percent.
In reality, he was off by $10 trillion in the total amount of U.S. wealth, and by double-digit percentage points on how much of the country’s population controls that wealth.
According to the Federal Reserve and economists who have estimated wealth concentration, U.S. households had a total net worth of about $40 trillion, and the top 1 percent controlled less than half of that.
Rather than tax households with more than $10 million in assets, excluding primary homes, to raise $5.7 trillion, Congress would have had to implement a 14.25 percent tax on the net worth of all Americans, including their primary homes, to raise the kind of money Trump promised, said Mark Zandi, now an economist with Moody’s Analytics. And that’s assuming no one found a way to cheat the system by undervaluing assets or moving them abroad.
Trump apparently wasn’t deeply involved in crunching the numbers.
When he announced his wealth tax proposal, Shiflett was helping to write the book that would outline the policies he’d support as president. Shiflett said he had one, long interview with Stone and Trump where they tried to come up with some ideas.
While he doesn’t remember who came up with the wealth-tax proposal, Shiflett said Stone drove most of the policy proposals. Trump had strong opinions on terrorism, on North Korea and strongly supported a single-payer health care system, but tax issues were an afterthought, Shiflett said.
“He did make a big thing about the tax that it would cost him a lot of money,” Shiflett said, adding,“It wasn’t going to cost him a lot of money because it wasn’t going to happen.”
Shiflett said after Trump won the White House in 2016, a Dutch television crew showed up at his home with the book and took its contents seriously, a position Shiflett thought was funny.
“There was no air of seriousness involved here,” Shiflett said. “It’s not like we were writing a book for the ages that people will always refer to when the great president is being considered for his place in history or something like that.” Shiflett added that Stone seemed mostly into the humor of Trump running for president.
Stone did not respond to a voice message and email seeking comment. A federal judge on Feb. 21 ordered him not to speak publicly about a criminal case against him. The White House did not immediately respond to a request for comment.
Once the proposal became news, it struck Douglas Holtz-Eakin, then chairman of Syracuse University’s economics department, as especially bizarre because of the favorable situation with the U.S. budget and the debt.
Holtz-Eakin, now the president of the right-leaning American Action Forum, said the Trump plan was the kind of thing he’d use in class as an example of bad policy.
If “the last time I accumulated a lot of wealth, they took 14.25 percent of it, am I really going to do that again?” Holtz-Eakin said.
In 2003, Holtz-Eakin took the helm of the Congressional Budget Office, just as the surpluses were turning into huge deficits.
To contact the reporter on this story: Joe Light in Washington at [email protected] To contact the editors responsible for this story: Wendy Benjaminson at [email protected] John Harney
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