Q&A of the Day – Is a “Wealth Tax” Constitutional? - Part 1
Each day I’ll feature a listener question that’s been submitted by one of these methods.
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Today’s entry...
The other day you had mentioned Warren’s wealth tax and I have been wondering if it is even allowed per our constitution. I feel that it would be a form of double taxation since I would already have paid property taxes to Palm Beach county. Also, how the heck would one value an investment portfolio for tax purposes? The value changes every minute. It’s crazy. So, I was wondering as to its constitutionality.
Bottom Line: You raise several good points that I generally can address and have a mix of answers and one big, looming, question mark. For those who aren’t familiar with a “wealth tax” concept or proposal, a la, Warren’s - the idea is that even after paying federal incomes tax on earnings – those above the stated threshold would continue to pay taxes on the“excess wealth” obtained. The clearest answer is to how “taxed wealth” would be assessed. The answer would almost certainly be whatever one’s recorded net worth is at the conclusion of December 31st. Just as income tax is currently determined. As for other questions you’ve raised...
The property tax example is a good one because it fits a similar mold. In Florida, and throughout most states, we’re forced to pay annual property taxes based on the assessed value of our property or risk having it seized by government. There’s no tax I believe to be more regressive or devoid of freedom and morality than property taxes. I think it’s quite literally anti-American to tax people out of their homes (remember why the revolution began?) and yet we do it daily. What’s more is that commonly majorities of South Floridians approve additional property taxes for things like additional teacher pay and special building projects for local governments. What the clever marketing campaigns for these assessments never show is how higher property taxes are directly linked with less affordability for all residents, lower home values and at worst people who’re forced to sell their homes due to the inability to afford higher property taxes. Yet we have them legally enforced, correct? That provides the road map for the wealth tax constitutionally question. The constitutional question of taxation is found in Article 1, Section 9 of the U.S. Constitution in clauses 4-7. Here’s what they say:
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.
Clause 5: No Tax or Duty shall be laid on Articles exported from any State.
Clause 6: No Preference shall be given by any Regulation of Commerce or Revenue to the Ports of one State over those of another: nor shall Vessels bound to, or from, one State, be obliged to enter, clear, or pay Duties in another.
Clause 7: No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.
The first thing that might jump out at you is that a federal income tax, as it’s currently instituted, wasn’t constitutional because any taxation had to be based on population, equitably. Not based on total earnings. That’s why there wasn’t a permanent federal income tax until 1913 with the ratification of the 16th Amendment. Lucky us. So, what about the legality of the wealth tax? I’ll address it specifically in the second part of this story. Here's the link to it: https://wjno.iheart.com/featured/brian-mudd/content/2019-11-11-is-a-wealth-tax-constitutional-part-2/