Elizabeth Warren's wealth tax

Warren proposes a 2% tax on those with a net worth over $50 million.

(A) How ya gonna value assets? Tom Brady may be asking $32 million for his house, but is it really worth it?

(B) How does this tax get past the U.S. Constitution. The sixteenth amendment limits taxing power to “incomes, from whatever source derived”, which can loosely be defined as any asset transfer. But assets held are not income, so where is the authority to tax?

I can’t address either, but re: A, it would be useful to hear how other countries do it, if anyone is familiar:
https://en.m.wikipedia.org/wiki/Wealth_tax
It’s not like we’d have to completely make it up from scratch.

I’m all for taxing the rich, but… I just can’t see how this would be an efficient thing to implement.

I say this because I have to do an annual financial disclosure, and even though I’m of MUCH more modest means than billionaires, the process of counting up my assets is very difficult and time-consuming for me to do, and I would think it would be a total nightmare for anyone trying to double-check that I’m not cheating. How anyone could look at a billionaire’s financial assets and have any confidence at all that there isn’t massive cheating strikes me as extremely implausible.

Why not close tax loopholes, raise rates, and hire more IRS auditors that can go through income tax returns for the richest? Warren isn’t stupid, so I just have to think I’m missing something as to why she isn’t proposing the most direct means of taxing the rich.

“From whatever source derived” seems to be under-utilized. We should do better at taxing all incomes at a similar rate. Something like, after a $100,000 personal exemption, tax all income at 50%.

A wealth tax with a very high personal exemption would be fine, if it’s legal.

A direct wealth tax could be problematic, but couldn’t you approximate it through a hefty capital gains tax, due immediately rather than waiting for the asset to be sold? Wealth doesn’t sit around, it makes money. I don’t know that there wouldn’t be pitfalls, but imagine that the average fortune of $50 million appreciates by 3% every year. Wouldn’t, then, a 67% tax on all capital gains over $1.5 million be, effectively, a 2% tax on wealth over $50 million?

A wealth tax isn’t just about getting money from the rich. It’s also to discourage large inactive holdings. Think Scrooge McDuck’s money vault that he goes swimming in occasionally. A wealth tax puts a cost on hording that money. So Scrooge can either invest that money so it outweighs the wealth tax or he can accept it being slowly bled back into the economy.

But McDuck’s pool of gold is a fiction. Does holding stocks and bonds really equate to swimming in money? Or owning massive houses or paintings from the Old Masters?

I’m truly asking out of ignorance here. I don’t really understand how the rich hold their wealth – nor do I understand why others would benefit if Rich Person A and Rich Person B sold each other their $30 million estates every few years, just swapping back and forth.

Thirty years ago 12 european countries had wealth taxes, now four do. They have found that a wealth tax, is too disruptive and hard to administer to be worth the relatively small amount raised.

Almost all of the wealth in really big fortunes is in unrealized capital gains. This means in order to pay the tax business owners would have to sell 2% of their business every year.

Luckily, this type of tax is illegal without a constitutional amendment, so this is just a way to express outrage at people who get rich by taking their companies public instead of legal consulting.

Alternate take: Those countries have very powerful and influential wealthy people who successfully used their power and influence to remove a tax they didn’t like.

Warren’s pandering with the so-called wealth tax is exceedingly disturbing and I’m not sure how the government will value or justify its seizing of wealth.

How do you value patents, royalties, copyrights? Artwork? The devil is in the details and don’t think once the camel gets its nose in the tent that it will stop at 2%.

I don’t think Warren’s idea is bad, in theory; if anything, I’d like to see it expanded to something like 5%. But I agree with the OP that tax filing would be a nightmare. The rich would have plenty of ways to under-report their wealth.

I don’t remember the argument for this being unconstitutional as particularly convincing.

Which isn’t what the OP is asking. They are examples of how various countries have valued assets. Does anyone know how they did it?
The wiki lists six current examples that aren’t just real estate, and according to you there were more. But nobody seems to know the actual mechanics.

It’ll never happen.

I don’t think this really answers your question, but if by “$30 million estate” you mean a home and land and outbuildings, then their state or city might benefit in taxes. Illinois, for example, has a transfer tax that is paid whenever property is sold.

We can certainly value stuff. A direct tax not based on income would be more of a problem.

A wealth tax is Constitutionally problematic because Art. I § 9 Cl. 4 requires that any direct tax be apportioned equally amongst the states. A direct tax is usually defined by the courts as one based on ownership rather than activity. A tax on ownership of one type of property, Real Property (land), has always been held to be a direct tax. In Pollock v. Farmers’ Loan & Trust Company 157 US 429 (1895) the Court held that taxes on rents or incomes derived from Real Property and taxes on Personal Property or incomes derived thereof were direct taxes and that the income tax at issue was thus unconstitutional. In response, the 16th Amendment was passed which removed the Constitional requirement that income taxes be apportioned.

Since we already tax income, transactions, capital gains, etc. then anything left in the category of “wealth” would almost certainly include an unapportioned tax on Real Property (unquestionably unconstitutional) or Personal Property (unconstitutional under 120+ years of precedent and reaffirmed as recently as * Sebelius *).

Now of course any wealth tax that was apportioned would be presumably Constitutional but since “wealth” is not equally distributed amongst the states there isn’t much enthusiasm for that idea.

From a constitutional perspective, proponents may be able to argue that all wealth is derived from income. Albeit, that if a wealth tax is instituted, it is essentially double taxation and multiple times over. Taxed at the time it is considered income and taxed annually as a part of your wealth, for the duration that you hold it.