Yellen says Biden has yet to decide on a wealth tax

WASHINGTON — Amid reports that the richest Americans have grown far richer during the pandemic year, Treasury Secretary Janet Yellen said on Sunday the Biden administration had yet to decide on imposing a new wealth tax.

"That's something that we haven't decided yet," Yellen said on ABC's "This Week" programme.

She said that President Joe Biden "hasn't proposed a wealth tax, but he has proposed that corporations and wealthy individuals should pay more in order to meet the needs of the economy, the spending we need to do".

Senator Elizabeth Warren, a liberal Democrat, has called for an annual tax of 2 per cent on every dollar of people's wealth above $50 million, and 3 per cent on every dollar above $1 billion.

Last month, Yellen told the New York Times that a Warren-style wealth tax would have "very difficult implementation problems". But she said she would consider other approaches that might have a similar effect.

A recent study by the humanitarian group Oxfam found that the world's richest 10 people — including Americans Jeff Bezos, Elon Musk and Bill Gates — had collectively seen their fortunes grow by $540 billion since the pandemic began, even as millions of Americans suffered.

The trillions of dollars spent in government stimulus plans during the pandemic have greatly swollen the federal deficit, and Republicans — who supported stimulus spending during the Trump administration — now warn that the deficits risk becoming unsupportable. 

Not one Republican supported Biden's $1.9 trillion stimulus plan, and the president could face similar resistance as he seeks to push through massive infrastructure or green-energy plans.

But, Yellen noted, the current exceptionally low interest rates have greatly reduced the cost of government borrowing. 

"Interest payments relative to the size of the economy have remained quite low," she said, "no higher than they were back in 2007".

The secretary did add that "in the longer run we need to get deficits under control to make sure that our fiscal situation is sustainable".

Yellen, a former chair of the Federal Reserve, again played down fears that stimulus spending could fuel dangerous levels of inflation, especially as the coronavirus vaccinations of millions of Americans raise hope of an economic boom.

"I think there's a small risk of inflation," she conceded. But "the most significant risk we face is a workforce that is scarred by a long period of unemployment."

Yellen said she "absolutely" does not expect a return to the runaway inflation of the 1970s.

If lower levels of inflation should emerge, the secretary said, "We have the tools to address it."