Yahoo Finance I’m an Economist: 5 Policies of Tim Walz That Could Impact the Wealthy if He Becomes Vice President
Tim Walz transformed Minnesota into one of the most progressive states in America by implementing a bevy of tax cuts, credits and rebates for low and middle-income families — and moderate tax hikes on the wealthy, according to the Institute on Taxation and Economic Policy.
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But what repercussions would his progressive policies have for the rich on a national scale if the Harris-Walz Administration ticket wins the election?
We turned to economists Stan V. Smith, Ph. D, President of Smith Economics Group, LTD. in Chicago and Michael Collins, CFA, Founder & CEO of WinCap Financial in Boston, for insight on how Walz’s five policies could impact the wealthy if he becomes the Vice President.
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The Big Picture: Wealth Transfer vs. Wealth Creation
There’s always that tension between wealth transfer and wealth creation; Walz will keep things moving more to the progressive left than they have been, said Dr. Smith.
“Walz and Harris favor policies that will generally control markets and wind up with more governmental oversight because you need an administrative state to do that.”
Some states find that giving money to the poor is the most efficient wealth transfer.
“I think Walz is more along the notion of hands-on transfer, which means there is an administrative layer in between to administer.”
“That’s one thing I think we’ll see more of government, so to speak.”
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Grocery Store Price Limits Could Mean Shortages and Closings
Think of economics as the study of incentives, what motivates human behavior, said Dr. Smith.
“If you tell grocery stores to limit their prices, the motivation will be to move out of town, or if you’re a grocery store, you might decide to sell your grocery stores and buy some shoe stores.”
“There is the golden goose kind of thought that when California taxes people, Elon Musk moves to Texas; when Illinois taxes people, Ken Griffin, who runs the largest hedge fund, [moves] from Chicago to Florida.”
When you implement price limits, and there’s an alternative, you will reduce the incentive for people to supply that industry and you’ll end up with shortages, Dr. Smith said.
“In Manhattan, you know there’s housing shortages; when there’s also price controls, people don’t want to build in Manhattan; they want to build in Buffalo or other places where they can make what’s called a market return.”
“The economist Milton Friedman said if we put ceilings on prices, we won’t have roofs over our heads; there will be fewer roofs.”
Tax Credits for Small Business Startups Can Prove Beneficial
Walz is supportive of investing in small businesses, said Collins.
“The government defines a small business with less than 100 employees that you’re paying, which means you probably have some means or some wealth behind you.”
“If you’re a wealthy person involved in job creation, you can see tax benefits on that side,” Collins said.
Raising Taxes on Corporations Could Compel Companies to Move Abroad
Increasing corporate taxes could drive more American production abroad [because] at the margins, some companies will be more incentivized to produce it elsewhere, said Dr. Smith.
“Apple manufactures in China and fewer foreign investors come here because of higher rates; if you want to start a factory, it might be more favorable to start it in Brazil than in Alabama,” Dr. Smith said.
He added there will be more incentive to move your business abroad, or live abroad; there will be less incentive for the wealthy to live here.
“If they say we’re going to tax you more, they’ll figure out a way to minimize that impact.”
The Wealthy Will Look for Loopholes
We’re all looking for ways to minimize our taxes; if you have children, you declare them as dependents, well, that’s a loophole,” said Dr. Smith.
“The wealthy will shuffle money [around] in ways that are legal or non-legal, such as foreign bank accounts, Cayman Islands, etcetera, ” he said.
“In the Cayman Islands, you find there are like 4,000 banks in Nassau (laughter).”
Child Tax Credit Would Benefit All
The child tax credit is one of the Harris-Walz Administration’s main policies. According to a Columbia University study, the tax break reduced childhood poverty by 30% during the pandemic. However, Congress failed to renew the program.
Governor Walz implemented a similar tax break in Minnesota in 2023. Every taxpayer with kids was entitled to receive $1,750 per child.
“An increase in child tax credits would benefit everyone,” said Collins.
“It would also benefit the wealthy because [they] would not be exempt from those child tax credits.”
Social Security Reform Hangs in the Balance
Social Security has a modest reserve, but it will run out in about a year unless the formulas change, the formula being principally when you can retire and how much you get when you do, said Dr. Smith.
“We have to do something about social security because it is actually the world’s largest legal Ponzi scheme.”
“They’ve already postponed when you can retire about a decade ago, it used to be 65, now it’s 67,” said Dr. Smith.
Delaying the qualification age can save some money; another option is to have a means test.
“I’m 77 years old; I’ve been collecting social security for a decade; the point is I make a good income; I get out of the system what I paid into it, but we might think after you make a certain amount of money, you don’t collect the full amount.”
“Social Security will need to be dealt with; nobody talks too much about it; they call it the third rail of politics, but ultimately, you can’t go forever on a Ponzi scheme.”
“There’s really not much anybody can do about it. If I’m told you used to get so much per month, and now you’re getting less per month, I don’t think it will cause me to do anything because it’s a fixed formula; I can’t change it.”
“If somebody says you have to pay more income tax, I might say, okay, I’m moving to Texas.”
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. For more coverage on this topic, please check out I’m an Economist: 5 Policies of JD Vance That Could Impact the Wealthy if He Becomes the Vice President.
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This article originally appeared on GOBankingRates.com: I’m an Economist: 5 Policies of Tim Walz That Could Impact the Wealthy if He Becomes Vice President
