Early in last week’s Democratic debate, Sens. Elizabeth Warren, D-Massachusetts, and Cory Booker, D-New Jersey, had an exchange that tells you almost everything you need to know about the Warren campaign, and even about the broader Democratic contest. It happened when moderator Andrea Mitchell lobbed her a softball question about uniting the country, and Warren batted it away with a paean to her favorite policy: stiff wealth taxation.
"The way we achieve our goals and bring our country together," said Warren, "is we talk about the things that unite us, and that is that we want to build an America that works for the people, not one that just works for rich folks."
Booker, who was asked whether he agreed with this strategy, somewhat regretfully demurred. He acknowledged the need for more tax revenue, of course, to fund the spending Democrats want to do. "But here's the challenge. We as Democrats need to fight for a just taxation system. But as I travel around the country, we Democrats also have to talk about how to grow wealth, as well."
And there, in a few simple words, is the choice Democrats face: between an economic moderate who thinks that growing the size of the economic pie has to be an important part of the Democratic agenda, and a full-blown progressive who just wants to carve it up differently.
This will not, of course, be news to anyone who has been paying attention. What's somewhat more interesting is their respective constituencies. Booker is overperforming among nonwhite voters, who tend to be not just lower-income but more socially conservative, and more focused on bread-and-butter issues, than white Democrats. Warren, on the other hand, is the candidate of the affluent, the educated and the white — what Republican polling firm Echelon Insights recently dubbed the "Acela Party."
It might seem a bit strange that wealth taxes are being promulgated by a candidate who caters to white professionals with healthy household balance sheets, while the former mayor of Newark is making such investment-bankerly noises. But in fact there's a certain logic to it. After all, wealth taxes — as Booker ably pointed out — don't really make much sense as a technocratic policy matter.
If you want to spend a bunch of money on new social programs, a value-added tax is harder to evade and raises a lot more revenue; a tax on capital income is more economically efficient and just as progressive; a broad-based and highly progressive income tax is much easier to administer; and if you think that billionaires get that way by doing something socially harmful, regulating or taxing that specific activity would be more effective at ending their malfeasance. None of these methods carries the heavy risk, inherent to a wealth tax, that America's capital base will erode, and then productivity will erode, and then worker incomes will shrink.
But there is one thing a wealth tax can do better than anything else: destroy fortunes. That money doesn't necessarily go to anyone else, mind you; it may just get eaten up by compliance costs and dead-weight losses. But the rich people definitely won't have it. This is a fairly useless policy goal unless you happen to be in direct competition with wealthy people for social status and scarce resources such as elite school places.
The best way to understand a wealth tax, in other words, is not in terms of rich and poor but as an intra-elite battle. The two sides are characterized by what New York Times columnist David Brooks once dubbed "status-income disequilibrium." One side consists of people whose elite jobs are well-paid compared with the national average but poorly paid compared with similarly educated and successful people in more mercenary fields, and who can therefore generally access the best resources only by leveraging family money, professional prestige or social capital. On the other side are those with more lucrative occupations who crassly buy their way in.
Heavy wealth taxation helps the former group by kneecapping their opponents without much touching their own, less tangible forms of social capital. Better still, this sounds like it does something for the poor, allowing them, and Warren, to congratulate themselves that they're really a finer grade of person, rather than some self-interested boob who votes from the pocketbook.
It's a startlingly apt summation of so much of Warren's campaign: policies that sound like they help the poor while somehow delivering the greatest benefits to the educated elites of the Acela Corridor.
Booker obviously understands the reality underlying the polished populist veneer. The only question is whether Democratic voters will.
Megan McArdle is a columnist with the Washington Post Writers Group. Follow her on Twitter, @asymmetricinfo.