Sen. Elizabeth Warren (D., Mass.) was back on the airways this week touting her signature “wealth tax” in a sharp exchange with CNBC’s “Closing Bell” host Sarah Eisen. I have previously written about the constitutional concerns over a true wealth (as opposed to an income) tax, the exchange concerned the impact of a tax on the most wealthy. Warren ridiculed the notion of the wealthy leaving the country as a mere “bluff” meant to deter her and others from forcing the wealthy to pay their fair share.
A wealth tax has long been a rallying cry for Democrats. During the Democratic primary, I wrote about New York Mayor Bill de Blasio and his “eat the rich” pitch for votes. He pledged to “tax the hell out of the rich.” Recently, de Blasio added that he viewed the public schools as a tool for wealth redistribution and not just education: “I’d like to say very bluntly our mission is to redistribute wealth. A lot of people bristle at that phrase. That is, in fact, the phrase we need to use.”
The wealth tax however has been the focus of Warren’s campaigns. She has the support of academics like Yale Professor Bruce Ackerman who assured Warren that such a tax would be constitutional. In a Slate column entitled “Constitutional Critiques of Elizabeth Warren’s Wealth Tax Proposal Are Absurd,” Ackerman dismisses any possible constitutional challenge and made reference to my earlier Washington Post column. As I have previously said, there are good-faith arguments on both sides of this issue and the outcome is likely to be a close vote. However, Ackerman reduction of countervailing arguments to absurdity not only omits key arguments but creates an incomplete account of the case against such a wealth tax. The “absurdity” of such a view is shared by a range of experts and law professors. Erik M. Jensen, the Coleman P. Burke Professor Emeritus of Law at Case Western Reserve University, analyzed the constitutionality of the proposal as concluded “at best, the wealth tax would be constitutional problematic.” Harvard Professor Noah Feldman concluded that it would be close question and would likely come down to Roberts’ vote. Chicago Law Professor Daniel Hemel also thought it would be close with a swing vote likely by Roberts. Michael Graetz, a professor of tax law at Columbia University, concluded “I think a constitutional challenge to an actual tax on wealth is inevitable.That it would fail does not seem to me to be obvious.” Brian Galle, a Georgetown professor at Georgetown Law, noted, as I did, that the absence of a transaction to tax would present a problem in a constitutional challenge. He added that, while he disagreed with earlier rulings of the Court like Pollock, “the Supreme Court doesn’t think that Pollock was wrong.” He added that Warren’s academic supporters did not reveal the full strength of arguments against such a tax under the Constitution.
The problem is the text of Article I, Section 8 which permits Congress to “lay and collect taxes, duties, imposts and excises.” However, it requires that these “be uniform throughout the United States.” The next section says that “no capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken.” A wealth tax by any measure is a “direct tax.” As I noted in my column, there are various contributing factors for this language from the infamous “Three-Fourths compromise” to early forms of taxation to a desire to limit federal tax authority.
Putting aside that interesting and unresolved constitutional question, Warren lashed out at the suggestion that such a tax would influence migration from the United States. Eisen reasonably noted that the tax “might also chase wealthy people out of this country as we’ve seen has happened with, with other wealth taxes. You just said how much we need the economy to be revitalized right now for companies to start adding jobs and not subtracting them anymore.”
Warren responded that “All I’m saying is can we have just, just a little fairness here? A two-cent wealth tax so that we can have universal childcare—”
Eisen interjected that she was “just presenting the counter argument.” Warren shot back
“Well, how about a counter argument though, based on fact? The wealthiest in this country are paying less in taxes than everyone else. Asking them to step up and pay a little more and you’re telling me that they would forfeit their American citizenship, or they had to do that and I’m just calling her bluff on that. I’m sorry that’s not going to happen.”
Warren may be right that this is not enough to cause a wealth flight, particularly given the constitutional challenges that could be raised. However, such flight from high taxes have occurred in countries like France.
I am still unclear on how Warren intends to do this constitutionally or logistically, as discussed in my Washington Post column. However, the fastest migration is likely to be into the courts rather than out of the country.
“. . . just a little fairness here?”
“Fairness,” in their view: Use others as a means to my ends. The collective owns an individual’s productive talent and money. And I, the voice of the collective, will seize and distribute that bounty as I see fit.
There is a word for that view of “fairness,” and it is *not* “freedom.”
Scrap the Cap on Social Security contributions, and levy a transaction tax (0.50%) on every exchange of funds. This should eliminate the need for a Income Tax. Another alternative is to raise the Capital Gains tax.
Of course none of this will happen because Congress is bought and sold.
The constitutionality of any income tax should be called into question, let alone wealth tax.
Not counting the 16th Amendment, income taxes are clearly unconstitutional, and there is no mention in the constitution that gives Congress the power to tax incomes.
What exactly is a “two cent tax?” Does she mean 2%?????? Of a person’s total holdings per year?????
The google machine is awesome I tell ya…
https://2020.elizabethwarren.com/toolkit/umt
Elvis Bug
and magically, with a $22trillion deficit already hanging over our heads, we’ll be able to afford “universal health care” and be like Canada and the EU. Riiiight.
Eating the rich never works. Just ask Bill Whittle.
Yes. The Constitution also prohibits government from taking property without just compensation. Most personal wealth isn’t sitting as a pig pile of cash, it’s invested…in real-estate, in corporations, in bonds. The Warren 2%/year wealth tax obliges liquidating investments (selling property) — there is an argument that this cannot be forced on a taxpayer without due process and/or just compensation. If investments are not “property” then what is?
The wealth tax experiment in France didn’t go well.
The non-partisan Tax Foundation (for the 2014 calendar year, the most recent available) states on their website that the top 1% of Americans in income earned 20.6% of Total Adjusted Gross Income, and paid 39.5% of Total Federal Individual Income Tax. You might say The Tax Foundation has their hand on the scale, maybe massaged the data. The non-partisan Charity Navigator gives The Tax Foundation a three (out of four) star overall rating, and its best rating, a four (of four) star rating, in Accountability and Transparency…not a fly-by-night operation.
Communist! Retired Blue Collar: if they take from the rich they will taking from poor people. Who the HELL are you to take what you didn’t earn and doesn’t belong to you?
A wealth tax is as constitutional as any other tax, Professor.
Warren is right, the rich pay proportionally less tax than the not so rich (most recent adjustment in that respect was trump’s tax break bill) and the Repubs will always side with the wealthy. Because history and voter base. The rich will always justify their position with some variation of ‘trickle on’ economics excuse except this rationale is flawed at the core…, the rich spend the same amount no matter what tax policy is. And they pay people a lot of money to find shelters. So taking a huge chunk of money from the economy to give to the rich in the form of tax breaks inevitably crashes economies. Momentum will keep an economy moving at first, then it will range, then it will crash…
Again, because history. Look what happens at the end of Republican administrations: Bush Sr. left in a rather sizable recession. Bush Jr left steaming economic wreckage as did trumpy bear. Yes, for those watching this equals a pattern.
Warren is one hundred percent on the right track. The wealthy paying a fair proportion in income tax has *never* crashed an economy. Again…, history. And she’d tear you up on the subject, Jon.
Elvis Bug
A wealth tax is as constitutional as any other tax, Professor.
Chuckles. See the actual constitutional language on direct taxes.
Hey, while I do that, how about you check out reality.
Elvis Bug
You’re not in a position to lecture anyone about that, Gainesville.
I’ll leave you to hallucinate while discussing reality then.
Elvis Bug
Deco, do you know Robert Barnes, by any chance?
Seems it says this: Article I, section 9, clause 4
“Clause 4: No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.”
Pretty important what comes after “unless”, no?
Seems further that income tax was authorized by the 16th Amendment in 1913.
Why should I not trust this information and listen to you?
Elvis Bug
Taxes are a direct result of the size of government and its unchecked spending habits.
Every penny taken from the People to feed that leech is money that could invested by the People in businesses that actually produce goods and services.
Essential government services….kept to an absolute minimum is acceptable….but when Government is the excuse for buying Votes from the People using their own money….and money borrowed when that well runs dry….is going to kill the Golden Goose.
The fight for power is all about controlling the spending…..not for reducing or placing limits on that spending.
Both Political Parties are guilty on that count or else we would have balanced budgets without wasteful spending and no National Debt or unfunded liabilities created by government.
Bug, not an expert on tax law, but I can correct the record on some of your points:
(1) “Bush Sr. left in [sic] a rather sizable recession.” Oil shocks and raising taxes to appease Democrats intensified the recession.
(2) “Bush Jr [sic] left steaming [sic] economic wreckage…” Read Gretchen Morgenson’s Reckless Endangerment before embarrassing yourself.
(3) “as did trumpy [sic] bear.” The economy was fine until your heroes in Wuhan ate that lab rat.
(4) “Yes, for those watching this equals a pattern.” Your pattern of oversimplifying history?
Gee, Diogenes is well versed in rhetoric. Shocking.
I do agree with one of your statements though: Bug, not an expert on tax law…
Elvis Bug
(1) “Bush Sr. left in [sic] a rather sizable recession.” Oil shocks and raising taxes to appease Democrats intensified the recession.
He didn’t. The recession was quite mild and concluded in April 1991. It took about 15 months for the labor market to turn around.
(2) “Bush Jr [sic] left steaming [sic] economic wreckage…” Read Gretchen Morgenson’s Reckless Endangerment before embarrassing yourself.
He didn’t. The economic contraction concluded in May 2009, before any porkulus spending could have a direct effect on aggregate demand. Every significant rescue measure was in place when Obama took office except for the diversion of funds to the Democratic Party’s auto industry clientele, which could have been avoided making use of the standing procedures for re-organization and liquidation of insolvent firms. The administration and Congress should have been alert to trouble brewing in the technology of finance and in the real estate market. NB, the biggest single public sector villain was Barney Frank, who rallied the swine in Congress to sabotage the Republican’s attempt to improve accounting practices at Freddie Mac and Fannie Mae.
As usual, you take a fraction of truth, blow it out of proportion, add your bitterness, and fancy yourself prescient. It’s quite entertaining to watch.
Elvis Bug
Probably not constitutional. But I would favor a more aggressive estate tax aimed at the billionaire level. let’s see what she actually has proposed:
“:The Massachusetts Democrat wants an annual charge of 2 percent on the holdings of anyone with more than $50 million in assets. Billionaires would be subject to a 3 percent tax, to “make sure rich people start doing their part for the country.” Polls show that Warren’s “ultra-millionaire tax” is overwhelmingly popular, with 60 percent of voters favoring it, including a majority of Republicans.”
I think charging off 2% of millionaires per year is the height of stupidity. Especially if you consider how badly the purchasing power of a “million’ has shrunk since 1933. This is very unwise. You are aiming a penalty at the most productive element and we might be surprised at how many decent people that would needlessly antagonize.
Now let me turn 180 degrees and say: target the billionaires, our enemy instead
I would be fully on board with some sort of billionaire tax. Is this feasible? Perhaps it is. Perhaps there are better ideas. It should be studied and taken seriously. They are a small number of scurrilous dogs who rule us like peasants. We should certainly be contemplating hot to cut the hubris of global capital down to size.
Right now I think a digital services tax like France has, is just what Silicon Valley deserves to help pay for the misery they have caused. Let’s start with that.
China has no estate or gift tax, and the income tax is barely enforced. They collect most from their VAT. Maybe the VAT is a simpler system in a complicated economy. I think that should be considered. What is practical and feasible is always a big factor in tax policy.
Sal Sar
PS the reality is,. nobody in power plans on paying back the US debt. A US sovereign debt default about a decade out is probably more likely than not. If not sooner
Agreed that a million doesn’t go where it once did, Sal Sar. That’s why I like that Warren’s plan calls for 2% (or two cents on the dollar) *at 50 million or above* with further attention to billionaires. Granted this would set off a furor about income versus assets and there’d be a stampede to block asset taxation while those with $50 million or above would try to become cash poor and asset rich.
Elvis Bug
First Ms. Warren needs a clear definition of ‘wealth’ and a reasoned explanation of how to value assets with fluctuating values, merely spewing “tax the wealthy” serves only to display an ignorance and another illustration of Einstein’s axiom of the two infinites. It would galactically more simple to revise the tax code and and create a simplified system with zero deductions and no variations of what is income or a deductible biz expense, then you would not have Warren Buffet’s secretary paying a greater percentage of tax than he does.
It would galactically more simple to revise the tax code and and create a simplified system with zero deductions and no variations of what is income or a deductible biz expense, then you would not have Warren Buffet’s secretary paying a greater percentage of tax than he does.
That’s a great idea. Two problems: economic sectors which benefit from differential tax rates like the tilted playing field. (2) A simplified income tax which was non-discriminatory between sectors kills off opportunities for graft. Politicians – especially Democratic pols – hate that.
I think that a comparison of tax rates as between the taxes paid by Warren Buffet and his secretary really involves a comparison of taxes paid on capital gains to taxes paid on earned income. It’s a comparison of apples to oranges.
Instead of discussing how to tax more perhaps we should be discussing how to spend less.
Define ‘ wealth ‘ . . . If you own your home and don’t have any large debt, are you ‘ wealthy ‘? If you’ve paid all the required income taxes on what you’ve earned, should you also be required to pay taxes on what you have in savings and investments . . . every year ?A ‘ wealth tax ‘ proposal sounds more like a political move to garner more support from those who aren’t ‘ wealthy ‘ and who resent those who are!
It sounds like a confiscatory tax to me. It’s interesting that it is coming up again now as we embark on a journey directed by the so-called progressives.
“Time to double or upgrade masks as coronavirus variants emerge, experts say
The discovery of highly transmissible coronavirus variants in the United States has public health experts urging Americans to upgrade the simple cloth masks that have become a staple shield during the pandemic.
The change can be as simple as slapping a second mask over the one you already wear, or better yet, donning a fabric mask on top of a surgical mask. Some experts say it is time to buy the highest-quality KN95 or N95 masks that officials hoping to reserve supplies for health-care workers have long discouraged Americans from purchasing….”
https://www.washingtonpost.com/health/2021/01/27/double-mask-variants-guidance/
Remember, masks are primarily to protect others and secondarily to protect you. That is because they limit the spread of your exhaling or coughs. If someone else’s breath or coughs reaches your mask, it is maybe stopped, but close to your mouth and nose. If we all wear them we are all protected.
I gather they told you this morning to try threadjacking.
Just joe biden Friday having another senile moment thread jacking while he signs more EO’s he has no knowledge of what they are. Back to reality china joe…it’s taxes duh ! , not mask Nazism.
Wouldn’t eliminating some loop holes available only to the wealthy raise more revenue?
the loop holes for the wealthy were put there by the government…they are in bed with each other…you close one they find another…who do you think donates the money to keep the politicians in power…the wealthy and the swamp does exactly as they are told by the wealthy…it’s a corrupt vicious cycle and voters will never change it…if you think Warren really cares about you then keep drinking the coolaid. Warren gets paid 100,000$ per year for teaching 1 course at Harvard plus her senator pay plus benefits for LIFE!!! Pretty good gig for promising stuff she knows she can’t get done.
It isn’t about raising revenue. It’s about organized theft from social enemies.
Taxation is always a protection racket by the master mob, the government. And yet, a necessary evil. Tax policy should aim at efficiency, and non-distortion of useful human activity. of course our major factions do not agree on what is useful. so there will be endless fiddling. that’s democracy in a nutshell
about wealth inequality. It is a threat to social order and it is also at the extreme extent it exists now, clearly unjust. Measure these billionaires against all others and it is a situation worse than feudal times by far
So, I have no problem with the notion of tax policy also addressing “social inequities” among the classes. however, be careful of those who pretend to care. For anybody who believes that the average Democrat funding billionaire seriously believes in that, you’re naïve. they only believe in faking out into believing that they do so care. in their manifest cleverness, they control the opposition by leading it, ie, funding it, themselves. thus ,they limit the potential negative effects.
this is part of the practical reason why Republicans need to rhetorically and sincerely attack billionaires. the billionaires will simply not life a finger to help those who are already in their corner. you have to show them with fearsome words and deads that you really do have it out for them. then, they will take you seriously
both parties must seriously take aim at billionaires as a group. there will be little progress for the people until they both do
again, policies that cast the net too wide are almost poison pills which defeat the effort before it begins. this has to have a lazer like focus at the billionaire group as such.
sal sar
ray dalio is a name who comes to mind., always chirping about inequality even as he is the walking talking manifestation of it. puh-lease!~ Sal
Pocahontas in the news…she is dummer than Biden…slow news day…the big news was the short squeeze by the genius nerds who trapped the billionaires and hedge funds with Gamestop…of course trading was halted, typical to big to fail and Biden has no clue what happened. The only answer is a female fed chair is in charge…playing the option leverage game is NOT for everyday folks…remember 2008…the government only bails out the uber wealthy, big banks, and red states in heavy debt…not us peons. Hang on for a very bumpy 4 years while every makes a fortune…except the middle class and poor…they will just wake up one day with no money in the bank and wonder why am I dead broke but everybody who works for the government is very rich…let’s say you are healthy and could live to 100…will your money run out if you retired at 62…of course…better go back to school and learn a skill online…robots will kill millions of jobs…every job will be from home and online…a world counsel forces 1 child per woman because the planet cannot support any more humans…a Hollywood movie or real life???
remember 2008…the government only bails out the uber wealthy, big banks, and red states in heavy debt…not us peons.
Once more with feeling: the government lost money on the AIG rescue and the auto industry rescue. The banks were given bridge loans, which they then paid back. What they really puked money into was the mortgage maws. Any party which owned mortgage backed securities issued by Fannie Mae and Freddie Mac avoided some losses.
Remember that Congress was itself a root cause of the financial crisis. In the final days of the Clinton administration, Congress passed the Commodities Futures Modernization Act of 2000 (without debate on the floor of the House or the Senate. The result was the deregulation of credit default swaps which enabled hedge funds to bet against the mortgage industry and housing market. Phil Graham was the sponsor of this unfortunate legislation. Remember, too, that Graham’s wife was on the board of Enron. Lessons learned here are: (1) that members of Congress are not necessarily well informed about legislation that they are voting on; and (2) members of Congress don’t do enough to disclose their conflicts of interest. Brooksley Bourne had a big “I told you so” moment on this one because she had issued a concept release on the need for more regulation of derivatives which was opposed by Arthur Levitt, Larry Sommers and Robert Rubin. We need legislators who care enough to develop an understanding of the relevant issues.
there should have been criminal financial fraud charges against major names. instead, having paid off obama in election donations, the big names skated
obama’s AG rounded up a few hundred nobody mortgage brokers and let the kingpins off the hook. didn’t even charge them. didnt even try.
this is what really, really pisses people off
Sal Sar
wall street alone spent 74 million to get Biden elected, way more than they gave Trump and that doesn’t even count Soros and big tech’s dark money millions…isn’t that collusion and guid pro quo?…these billionaires will certainly demand a huge return for their investment in Biden and they’ll get it to. And they just laugh at the rest of us fools for letting it happen. And now they want DC to be a state…totally unconstitutional…and DC wants to control all voting taking it away from states!
Oh yeah, sure Turley’s a Democrat. That’s why he’s busy here protecting the GOP original base – before the crazies – the rich. Kurt’s billionaire will love it.
Thank’s for the snarling non sequitur. Always an education.
How laughable that Joe Friday thinks the GOP’s “original base” is the rich. The rich are all in the Democrat party. You can pull out one or two rich people who support the Republicans, like Koch and a handful of others, which leftists point to as “proving” that the GOP is full of rich people–as if that makes reality. If it were true that the GOP’s “original base” were rich (as well as “crazies” which is gaslighting at its best), then the GOP would be running big tech, Hollywood, academia, and on and on. In fact, Joe Friday’s attempt to broad-brush Turley as well as all Republicans, points to the validity of the theory on this blog that Joe Friday operates out of a country that starts with the letter “R.”
Well, Gainesville’s a living breathing example of the Dunning-Kruger effect. The GOP’s ‘original base’ encompassed every strata of society, affiliated by being (1) not implicated in the Southern plantation economy or the social system of the lowland South, (2) skeptical of immigration, (3) congenial to industrial development, and (4) uncongenial to the seedy side of life (saloons, &c).
As for our current age, all strata of society are split between the parties. Wealthy people who vote Republican are likely to have certain indicia keyed to biography, family history, industrial sector, region, residence, religion, &c. (And, if I’m not mistaken, are disproportionately likely to be petty rich rather than big rich).
To paraphrase PJ O’Rourke, giving Congress the power to tax is like giving teen age boys whiskey and car keys
NB, since 1937, if the appellate judiciary can come up with some specious excuse to allow federal authorities to exercise powers not delegated in the economic realm, they’ll do it. Courts which pretend that a farmer growing crops for his own consumption or pretend that one scuzzy juvenile selling a nickel bag to a less scuzzy juvenile or pretend that ordering lunch at a diner constitute ‘interstate commerce’ will manufacture excuses for anything. At the heart of our institutional crisis is that our appellate judges and our law professors are high class shysters. You shouldn’t conceal that by ‘collegial’ blather.
I’ve never been impressed when I’ve seen Prof. Ackerman’s name come up in public discussion. (There was an amusing parody of some of his argumentation published in Constitutional Commentary ca. 1998.
It’s a direct tax, no? It’s a tax on stocks, not flows, no? So it requires apportionment among the states. You’ll have to state a dollar value to be levied, apportion that among the states, then have the state governments or regional offices of the federal government impose the levy on the assets they can locate in that state. Since the effective rate would be a lot higher in impecunious states like Mississippi than in affluent states like Connecticut, it’s a reasonable wager that a lot of abstract assets are going to be transferred to custodians in Connecticut, Massachusetts New York, and New Jersey. So, you’re going to be digging into people with immovable property, more severely in Mississippi, Arkansas, New Mexico, Montana. So, it’s Bill diBlasio screwing over farming, ranching, and commercial real estate in Little Rock and Great Falls. Why does this not surprise me?
While we’re at it, what happens to people in the territories? Guam and the Virgin Islands have per capita income flows 1/3 lower than the national mean, Puerto Rico about 60% lower, and Saipan and American Samoa lower still. You exempt them, do you have to exempt DC, wherein personal income per capita exceeds that of any state?
good observations Art
Sal
Warrens Wealth Tax I hope she is talking about taxing her and her husbands wealth they have made in real estate, stocks and etc. Her hands are not clean. When you take their money they cry and yell but its OK taking others?
She talks with her hands constantly. Too many facial expressions. Too ugly. Send her back to Warrensburg.