Welcome to DU! The truly grassroots left-of-center political community where regular people, not algorithms, drive the discussions and set the standards. Join the community: Create a free account Support DU (and get rid of ads!): Become a Star Member All Forums Issue Forums Culture Forums Alliance Forums Region Forums Support Forums Help & Search
Joe BidenCongratulations to our presumptive Democratic nominee, Joe Biden!
 

Shrek

(3,970 posts)
Thu Nov 7, 2019, 01:21 PM Nov 2019

The Big Problem With Wealth Taxes

https://www.nytimes.com/2019/11/07/opinion/wealth-tax-constitution.html

Senator Elizabeth Warren unveiled a new wealth tax proposal last week that she says will raise — along with her previously announced wealth tax plan — $3.75 trillion over the next decade. Senator Bernie Sanders says his wealth tax will yield $4.35 trillion over the same period.

We fear these figures are vast overestimates. The likeliest outcome is that a wealth tax will raise exactly zero dollars. The problem, alas, is the Constitution. The Warren and Sanders plans run headlong into more than two centuries of precedent that cast doubt on the constitutionality of wealth taxation.

We are tax law professors who identify as liberal Democrats, donate to Democratic candidates, publicly opposed the Trump tax cuts and strongly support higher taxes on the affluent. We are heartened that prominent Democratic presidential candidates are taking the problem of wealth inequality very seriously. We are worried, though, that leading figures in our party are coalescing around an idea whose constitutionality is doubtful at best.
If I were to vote in a presidential
primary today, I would vote for:
Joe Biden
7 replies = new reply since forum marked as read
Highlight: NoneDon't highlight anything 5 newestHighlight 5 most recent replies
The Big Problem With Wealth Taxes (Original Post) Shrek Nov 2019 OP
Shrek, thanks for this posting. :) Sloumeau Nov 2019 #1
I thought Bernie's plan relied primarily on increased income tax for the 1%, plus Fiendish Thingy Nov 2019 #2
Opinion piece by a member of the Federalist Society attacking Warren. Dr Hobbitstein Nov 2019 #3
Good call! eom BlueMTexpat Nov 2019 #4
Wealth tax will never happen. NYMinute Nov 2019 #5
It is unclear if a wealth tax is constitutional Gothmog Nov 2019 #6
Wealth Tax will be tied up in courts for a very long time Gothmog Nov 2019 #7
 

Sloumeau

(2,657 posts)
1. Shrek, thanks for this posting. :)
Thu Nov 7, 2019, 01:26 PM
Nov 2019
If I were to vote in a presidential
primary today, I would vote for:
Joe Biden
 

Fiendish Thingy

(15,361 posts)
2. I thought Bernie's plan relied primarily on increased income tax for the 1%, plus
Thu Nov 7, 2019, 01:42 PM
Nov 2019

A transaction tax on sales of stocks and bonds.

My understanding is Warren's plan relies more heavily on the wealth tax, and the Constitutionality is an issue she must address.

I'm sure there are work arounds, such as taxing the sales of yachts and other luxury items, and increasing capital gains above a certain level, but without the wealth tax, it is much more difficult to raise the funds needed for the various programs without a corresponding increase in taxes elsewhere.

And yet, many nations raise enough for universal healthcare and free college; of course, they spend far less of their GDP on the military...

If I were to vote in a presidential
primary today, I would vote for:
Undecided
 

Dr Hobbitstein

(6,568 posts)
3. Opinion piece by a member of the Federalist Society attacking Warren.
Thu Nov 7, 2019, 03:10 PM
Nov 2019

Yeah, I'll pass.

If I were to vote in a presidential
primary today, I would vote for:
Undecided
 

NYMinute

(3,256 posts)
5. Wealth tax will never happen.
Thu Nov 7, 2019, 04:36 PM
Nov 2019

It only garners votes of people who have a visceral hatred of rich people and a vast majority of Americans don't share that view.

If I were to vote in a presidential
primary today, I would vote for:
Joe Biden
 

Gothmog

(143,998 posts)
6. It is unclear if a wealth tax is constitutional
Thu Nov 7, 2019, 06:06 PM
Nov 2019

The law is not clear here. https://taxfoundation.org/warren-wealth-tax-constitutionality/

Another issue is that a wealth tax may violate the U.S. Constitution, though legal opinions thus far are mixed. Our report did not analyze whether a wealth tax would be constitutional, and the short answer is that it’s unclear.

The Constitution prohibits federal direct taxes that are not apportioned by population, except for the income tax which is specifically permitted by the Sixteenth Amendment. I think every expert would agree on those points.

So the question is, what is and is not a direct tax? In one of the first U.S. Supreme Court cases, the Hylton case of 1796, they observed that a capitation, or head tax (flat rate on each person), would be a direct tax and thus unconstitutional if not apportioned. In the Pollock case of 1895, they came to a similar conclusion. That’s why the Sixteenth Amendment was adopted, to allow income taxes to be constitutional. An attempt to tax unrealized capital gains was struck down in the Macomber case of 1920.

This tax may be upheld but it would take years of litigation
If I were to vote in a presidential
primary today, I would vote for:
Joe Biden
 

Gothmog

(143,998 posts)
7. Wealth Tax will be tied up in courts for a very long time
Thu Nov 7, 2019, 08:29 PM
Nov 2019

I personally doubt that the proposed Wealth Tax is constitutional. The direct tax clause of the US constitution is clear and the 16th Amendment does not authorize this tax




Additionally, a wealth tax would almost certainly face a legal challenge from well-funded conservative opponents. And it’s genuinely unclear whether it would ultimately be ruled constitutional. The issue isn’t that Congress can’t enact a wealth tax. It’s that if a wealth tax counts as a “direct” tax, Congress would have to ensure that the amount of money coming from each state was roughly the same on a per-capita basis, as there is a provision of the Constitution that bans direct taxes unless the amount collected is drawn equally from the states based on their populations. Given that wealth is not evenly distributed across the states, that equal distribution would be functionally impossible to ensure.

The fate of a wealth tax, then, would hinge on whether it counts as a direct tax. That’s a tough question to answer, because the Constitution itself doesn’t really define what a direct tax is, beyond the fact that the category includes a poll tax, which is a fixed amount charged for every person. Taxes like tariffs and certain others that can’t be fairly distributed on a per-person basis are generally not considered direct taxes. But how all of this would apply to a wealth tax isn’t entirely clear. The Supreme Court weighed in on this question more than 100 years ago — and not in the wealth tax’s favor. In 1895, the court struck down a federal income tax law because it taxed income generated from property, including land and other kinds of personal property, like stocks and bonds. The decision was controversial, and Congress and the states effectively reversed part of it 20 years later with the passage of the 16th Amendment which allowed Congress to tax income without worrying about how evenly it was distributed. But Congress’s authority to tax wealth wasn’t addressed by the amendment, and the Supreme Court hasn’t really returned to the issue in the past century.

Warren’s defenders argue, however, that the court simply got it wrong back in 1895, and that a modern wealth tax wouldn’t count as a direct tax. But the court’s right-leaning justices might approach the tax with a less favorable eye. And the existence of the old precedent could give the court’s conservative justices a way to dispatch a wealth tax relatively easily, which gives experts like Daniel Hemel pause. “A wealth tax could raise trillions of dollars — or, if it’s struck down by the Supreme Court, it could raise nothing,” said Hemel, a law professor at the University of Chicago. “That’s a really big risk if you care about the redistribution of income and you’re trying to figure out how to get it done.”

This tax is not likely to survive legal challenge
If I were to vote in a presidential
primary today, I would vote for:
Joe Biden
Latest Discussions»Retired Forums»Democratic Primaries»The Big Problem With Weal...