Fauxcahontas’ Wealth Tax: Possibly Unconstitutional; Difficult to Administer

WFB: Democratic presidential hopeful Elizabeth Warren’s wide-ranging progressive platform is dependent in part on an “Ultra-Millionaire” wealth tax on the richest people in the United States, but questions about its efficacy and constitutionality make it a risky wager on which to stake her political future.

The Washington Free Beacon analyzed Warren’s wealth tax by speaking with experts about the difficulties of implementing such a plan in the United States, including whether it would pass constitutional muster. Even if passed by Congress, its implementation could all hinge on which assets Warren’s government would target for those households under the tax’s umbrella.

What’s in Warren’s Wealth Tax And What Would It Pay For?

A wealth tax is a direct tax on a person’s assets. This is distinct from an income tax, which is levied on the amount of income a person makes in a year; a sales tax, a tax on the value of a transaction; and a capital gains tax, a tax on the profit of the sale of certain assets. Each of these taxes is applied when money changes hands. A wealth tax, however, is levied on the amount of wealth a person has, or at least the amount they report to a taxing authority.

Under Warren’s proposal, all assets in excess of $50 million would be taxed at two percent annually, while assets in excess of $1 billion would be taxed at three percent annually. This means that in the first year of Warren’s tax plan, Jeff Bezos—net worth $148.5 billion—would pay about $4 billion in taxes on his wealth.

The two UC Berkeley economists who designed the plan, Emmanuel Saez and Gabriel Zucman, estimate the tax would raise about $2.75 trillion over 10 years while affecting just 75,000 families—less than 0.1 percent of households. Compliance would be enforced through expanded funding for the IRS, mandatory audits for a share of wealth-tax targets each year, and a one-time tax penalty for any person who tries to renounce his citizenship to get out of paying the tax.

Saez and Zucman are well-known leftist economists and frequent collaborators of Thomas Piketty, author of the controversial blockbuster Capital in the Twenty-First Century. The trio collaborated on a landmark 2016 study of inequality, arguing that growth has stagnated for the bottom half of earners since 1980. Subsequent work, however, has challenged this finding; the debate is ongoing.

Warren often asks her audiences if they own homes, before telling them they already pay a wealth tax in the form of property taxes. In a populist line her crowds love, she says this tax is the same thing but for just the tippy top of the 0.1 percent and will include “their Rembrandts and their diamonds.”

“I’m calling it the ‘Ultra-Millionaire Tax,’ and we can use the significant revenue it creates to start rebuilding our middle class,” Warren wrote in January.

With this tax, Warren says, the U.S. could cancel student-loan debt for 95 percent of Americans in the red, make public two- and four-year college tuition free, provide universal child care for “every one of our babies age 0 to 5,” and universal pre-kindergarten for three- and four-year olds. All that, she claims, with a trillion dollars left over.

Four of Warren’s major proposals alone cost nearly $4.5 trillion: a green manufacturing investment over the next 10 years ($2 trillion), fighting opioids ($100 billion), canceling student debt and offering free public college ($1.25 to $1.565 trillion), and offering universal child care ($700 billion). During the campaign, she’s put her name behind the Green New Deal and Medicare for All, which by some estimates would constitute a whopping $126.6 trillion in government spending over the next 10 years.

What Do We Know About the Effects of Wealth Taxes?  MORE