One Wall Street economist on Monday warned clients about the tax proposals touted by Democratic presidential hopefuls Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., saying investors should have "lots to worry about."
Between Sanders' plan that's "designed to 'tax and destroy' large net wealth" and Warren's overestimation of potential revenue streams to fund her policy goals, the policies of both should inspire unease "from various angles," wrote Philipp Carlsson-Szlezak, chief U.S. economist at AB Bernstein.
It's important for voters to differentiate between the proposals of each candidate, the economist added, because while Sanders believes the U.S. should not have billionaires, Warren's plan views the fortunes of the ultra-wealthy as something to be skimmed but ultimately retained.
"The wealth tax proposals of presidential candidates Sanders and Warren offer fundamentally different policy choices with diverging implications for tax burdens, wealth preservation and implicit wealth caps in America," the economist wrote in a note.
"The political objective of the Sanders wealth tax is to abolish the billionaire class over the long run and significantly reduce it in the medium run," Carlsson-Szlezak added. "The political objective of the Warren wealth tax is to raise revenue to fund additional spending programs. This finds expression in Warren's wealth tax schedule, which stunts wealth growth, but allows most estate sizes to persist or slowly rise."
Carlsson-Szlezak listed several concerns voiced by voters and whether he believes the worries are valid or misplaced.
The Bernstein economist did push back on some of Wall Street's more apocalyptic concerns, writing that arguments about collapsing asset prices, lower capital formation and the emasculation of American capitalism are "flimsy."
"Removing 'unlimited upside' does sound un-American, but we're inclined to believe that today's occupants of college dorm rooms wouldn't be dissuaded from taking entrepreneurial risk with a wealth tax," he wrote.