Both Sen. Elizabeth Warren, D-Mass and Sen Bernie Sanders, I-VT have devised a so-called wealth tax as the center of their agendas. Warren’s tax would take two percent of a person’s assets starting at $50 million, escalating to six percent starting at a billion dollars,
Two purposes exist for the wealth tax. First, both Warren and Sanders need money, lots of it, to finance expensive schemes such as the Green New Deal and Medicare for All. Second, both politicians desire to punish the wealthy for their success.
It should be noted that by assets, Sanders and Warren mean everything, cash, stocks, homes, artwork, yachts, private planes, all of it. Both of the candidates for president believe that the possession of a lot of assets is obscene and that the government needs to rectify that state of affairs, fast, quick, and in a hurry.
USA Today has a detailed analysis of proposals for a wealth tax, including their history. Franklin Roosevelt favored a soak the rich scheme because, “People know that vast personal incomes come not only through the effort or ability or luck of those who receive them, but also because of the opportunities for advantage which government itself contributes. Therefore, the duty rests upon the government to restrict such incomes by very high taxes.”
FDR wanted to impose confiscatory income taxes on the wealthy. However, Warren and Sanders want, what is in effect, a nation-wide property tax on everything above a certain valuation. The idea has not been attempted before in the United States simply because it goes contrary to the United States Constitution,
The reason why the 16th Amendment had to be passed to permit a federal income tax is that Article 1, Section 9 of the United States Constitution stated, “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken.” Later judicial precedence confirmed that the Constitution forbade direct taxes on persons or property. The 16th Amendment altered that provision to allow for a national tax on income. However, a national tax on property is still prohibited. A new constitutional amendment would have to be passed and ratified, the prospects of which would be dim at best,
A wealth tax, especially when one considers some of the rhetoric from Warren and Sanders attacking people with great wealth, would constitute a bill of attainder, also forbidden by Article 1, Section 9. A bill of attainder is a piece of legislation punishing specific individuals or groups of people without recourse to a trial, mostly for political dissent. The British government had abused this power constantly by the time the Founders were drafting the Constitution.
“Under the test laid out in the 1946 case United States v. Lovett, bills of attainder identify specific groups (in this case ‘billionaires’) and impose punishment (taking wealth) without a trial. Laws denying employment to members of subversive organizations have been overturned by this standard; replace ‘communists’ with ‘the wealthy’ and you can see how the class warfare script has flipped.”
Of course, Warren and Sanders seem to be unwilling to spoil the beauty of the thing with legality. Their attitudes toward, for example, the 2nd Amendment suggest that they hope that the idea of a “living constitution” would be able to be interpreted to allow for a wealth tax.
However, even if a wealth tax could be, in some tortured way, be found to be constitutional, it turns out that it is bad fiscal policy. Such a tax would inhibit economic growth and job creation which the government relies on to raise revenue and to keep as many people as possible off of social services.
The Mises Institute also reveals the dirty little secret of a wealth tax, Even if the government were to confiscate all the wealth of every billionaire in the country, presuming that it can locate it, the resulting revenues would not be sufficient to pay for that schemes being devised by either Bernie Sanders or Elizabeth Warren. A wealth tax would have to be supplemented by a middle-class tax increase – a big one.
Sanders readily admits that he will need a middle-class tax increase, though he claims that people will save more money than the government will tax in the long run. Warren denies that her schemes will hit the middle class. Only big corporations and the wealthy will be forced to pay more.
“Senator Warren’s wealth tax plan, despite the well-intended programs that it will generate; will end up as merely a tool to increase the power of Washington policymakers. Over time, taxes will creep down the income scale as the income tax did, eventually hiking the tax burden for the middle class, while also cutting productivity which will drive down wages and wealth for everyone.”