Sen. Elizabeth Warren unveiled her new proposal to tax the wealthy that calls for a 2% annual tax on wealth of more than $50 million and 3% on wealth more than $1 billion. Grover Norquist, president of Americans for Tax Reform, and David Gamage, law professor with Indiana University, Bloomington who advised on this tax plan, joined "Squawk Box" on Tuesday to discuss. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi

A slew of Democrats on Capitol Hill — including progressives Sen. Elizabeth Warren, D-Mass., and Sen. Bernie Sanders, I-Vt. — on Monday proposed a 3% total annual tax on wealth exceeding $1 billion.

They also called for a lesser, 2% annual wealth tax on the net worth of households and trusts ranging from $50 million to $1 billion.

The Ultra-Millionaire Tax Act aims at reining in a widening U.S. wealth gap, which has been exacerbated by the Covid pandemic.

“The ultra-rich and powerful have rigged the rules in their favor so much that the top 0.1% pay a lower effective tax rate than the bottom 99%, and billionaire wealth is 40% higher than before the Covid crisis began,” Warren said Monday in a statement.

About 100,000 Americans — or, fewer than 1 in 1,000 families — would be subject to a wealth tax in 2023, according to Emmanuel Saez and Gabriel Zucman, economists at the University of California, Berkeley.

The policy would raise at least $3 trillion over a decade, they found.

Warren called for the tax revenues to be invested in child care and early education, K-12 education and infrastructure.

Aside from Warren and Sanders, other co-sponsors of the legislation include: Sens. Sheldon Whitehouse, D-R.I.; Jeff Merkley, D-Ore.; Kirsten Gillibrand, D-N.Y.; Brian Schatz, D-Hawaii; Edward Markey, D-Mass.; and Mazie Hirono, D-Hawaii. Reps. Pramila Jayapal, D-Wash.; and Brendan Boyle, D-Pa., are also co-sponsors.

The bill likely faces significant obstacles in the Senate, where Democrats hold the slimmest of majorities.

Some groups also forecast a wealth tax would have some negative effects.

A 2020 Tax Foundation analysis of separate Warren and Sanders wealth tax proposals during their presidential runs found they would reduce U.S. economic output by 0.37% and 0.43%, respectively, over the long term.

A wealth tax would also face administrative and compliance challenges, such as difficulty valuing assets and likely tax evasion schemes, according to the Tax Foundation.

The Ultra-Millionaire Tax Act would attempt to address some of these issues.

The legislation would invest $100 billion into IRS systems and personnel, ensure a 30% audit rate for the super wealthy, and impose a 40% exit tax on wealthy Americans who seek to renounce their citizenship to avoid a wealth tax.

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