Democratic Primaries
Related: About this forumThe Big Problem With Wealth Taxes
https://www.nytimes.com/2019/11/07/opinion/wealth-tax-constitution.htmlSenator 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.
primary today, I would vote for: Joe Biden
Sloumeau
(2,657 posts)primary today, I would vote for: Joe Biden
Fiendish Thingy
(15,361 posts)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...
primary today, I would vote for: Undecided
Dr Hobbitstein
(6,568 posts)Yeah, I'll pass.
primary today, I would vote for: Undecided
BlueMTexpat
(15,348 posts)primary today, I would vote for: Joe Biden
NYMinute
(3,256 posts)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.
primary today, I would vote for: Joe Biden
Gothmog
(143,998 posts)The law is not clear here. https://taxfoundation.org/warren-wealth-tax-constitutionality/
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. Thats 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
primary today, I would vote for: Joe Biden
Gothmog
(143,998 posts)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
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The fate of a wealth tax, then, would hinge on whether it counts as a direct tax. Thats a tough question to answer, because the Constitution itself doesnt 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 cant 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 isnt entirely clear. The Supreme Court weighed in on this question more than 100 years ago and not in the wealth taxs 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 Congresss authority to tax wealth wasnt addressed by the amendment, and the Supreme Court hasnt really returned to the issue in the past century.
Warrens defenders argue, however, that the court simply got it wrong back in 1895, and that a modern wealth tax wouldnt count as a direct tax. But the courts right-leaning justices might approach the tax with a less favorable eye. And the existence of the old precedent could give the courts 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 its struck down by the Supreme Court, it could raise nothing, said Hemel, a law professor at the University of Chicago. Thats a really big risk if you care about the redistribution of income and youre trying to figure out how to get it done.
This tax is not likely to survive legal challenge
primary today, I would vote for: Joe Biden