Apportionment required?

[Colonel_Buck]

2020 presidential hopeful Sen. Elizabeth Warren, D-Mass., is proposing a new “wealth tax” on Americans with more than $50 million in assets, as well as other measures that include a significant hike in funding for the Internal Revenue Service.

"We need structural change. That’s why I’m proposing something brand new – an annual tax on the wealth of the richest Americans. I’m calling it the 'Ultra-Millionaire Tax' & it applies to that tippy top 0.1% – those with a net worth of over $50M," Warren, who sits on the left of her party, tweeted Thursday afternoon.

https://www.foxnews.com/politics/elizab ... ans-report.

[Pottapaug1938]

She's one of my Senators, and I like her (but not for President), but between the apportionment issue, and a whole bunch of other issues which ten seconds' thought brings to mind, I don't see this working well at all. Nice try, Senator, though....

[Famspear]

There are a few law review articles that have been cited over the past few days as support for the idea that such a tax might not be considered a direct tax, and thus might not have to be apportioned. Unfortunately, with tax season heating up, I haven't had a chance to look at a single one of the articles.

Of course, the idea of a U.S. Federal ad valorem tax on property, whether it be against real estate or personalty, would seem to be a difficult thing to pass constitutional muster.

I don't know (yet) the details of what Elizabeth Warren is proposing.

[Judge Roy Bean]

...

I don't know (yet) the details of what Elizabeth Warren is proposing.

Theft.

[fortinbras]

Warren is proposing, at long last, a reversal of the trickle-down principle in use since Death Valley Ronnie.

A sort of procrustean tax that lops off most of a billionaire's income above a (very high) level. Not to worry, the billionaires remain billionaires and they'll still have enormous wealth, so they won't be missing any meals. But their excessive income will be heavily taxed so that a lot of bottom 20% won't be missing any meals either.

[KickahaOta]

Setting the constitutional issue aside, the proposal seems like the Asset Protection Attorney Full Employment Act. We would inevitably see every kind of multi-level multi-country structure that suitably well-paid legal minds can devise, to get assets off the books of the very wealthy.

[AndyK]

Regarding apportionment:

Could be imposed as a surtax or by juggling the tax rate brackets.

Both have worked in the past.

However, to make it work, the tax code would require a major overhaul to move the billionaires income INTO "income" and eliminate all the loopholes.

Agreed with the prospect of it becoming the "Full Employment For Tax Attorneys" act.

[Jeffrey]

For the laymen, could you explain why this would have apportionment issues while the estate tax seemingly does not?

[Arthur Rubin]

For the laymen, could you explain why this would have apportionment issues while the estate tax seemingly does not?

The estate tax is a tax on the transfer of assets from the person to the estate.

[Famspear]

For the laymen, could you explain why this would have apportionment issues while the estate tax seemingly does not?

The estate tax is a tax on the transfer of assets from the person to the estate.

Exactly.

If what Senator Warren is proposing is a tax on "wealth" as of a given moment in time, that sounds like it could be a tax on property by reason of its ownership. "Mr. Billionaire, we see that you own this much real estate, stocks, bonds, money, etc., on December 31st, having a total value of $xxxx, and by reason of your ownership of these items you are liable for a tax of $______."

By contrast, the Federal estate tax is imposed by reason of the transfer of property from one person to another person. Same with the Federal gift tax.

Historically, the Federal courts have arguably considered a tax on property by reason of its ownership to be a "direct tax" as that term is used in Article I of the U.S. Constitution (and required to be apportioned among the states according to population) and a tax on the transfer of property to be an "excise" (a type of indirect tax) (not required to be apportioned, but required to be imposed with "geographical uniformity", meaning that Congress could not impose such a tax, for example, only in Georgia and Montana).

Similarly, the Federal income tax is not a tax on property by reason of its ownership. It is a tax on an event -- the realization of income. Thus, for purposes of the apportionment requirement in Article I, the Federal income tax is treated as an excise (not required to be apportioned, but required to be imposed with geographical uniformity).

Indeed, the Federal income tax is imposed on the income realization event even if the recipient of the income does not own the property that was received in the income event (such as the receipt of stolen money). The Federal income tax is not a property tax (i.e., not a tax on property by reason of its ownership).

As an aside: Many tax protesters have been tripped up because they could not grasp (or refused to accept) the fine legal point that under the Sixteenth Amendment, a Federal income tax does not have to be apportioned among the states by population, regardless of whether the income tax is "called" a direct tax or, alternatively, an excise.

[fortinbras]

Warren's tax proposal is not strictly a tax on wealth, in the sense that it taxes money accumulated in previous years. It is a tax on 'excessive" income in a taxable year. If a taxpayer is paid (e.g.) more than a million in one year, the amount above $500,000 will be taxed at a much higher rate (e.g., 70%) while the $500,000 will only be taxed at the ordinary rate. This very prosperous taxpayer will have, after taxes, something better than half-a-million so he won't be forced to miss meals or sleep in the park. David Hume said those who prosper the most should give back the most.

[Famspear]

Warren's tax proposal is not strictly a tax on wealth, in the sense that it taxes money accumulated in previous years. It is a tax on 'excessive" income in a taxable year. If a taxpayer is paid (e.g.) more than a million in one year, the amount above $500,000 will be taxed at a much higher rate (e.g., 70%) while the $500,000 will only be taxed at the ordinary rate. This very prosperous taxpayer will have, after taxes, something better than half-a-million so he won't be forced to miss meals or sleep in the park. David Hume said those who prosper the most should give back the most.

Interesting.

Such a tax would indeed be an income tax, not a "wealth" tax, and (under the case law) would not be required to be apportioned among the states according to population.

[Famspear]

However, the Warren proposal has been described elsewhere as follows:

Under the net worth tax you [Senator Warren] have proposed, American households with a net worth of $50 million or more would be subject to an annual tax of 2% on their net worth between $50 million and $1 billion, and an annual tax of 3% on their net worth above $1 billion.

For example, a household with a net worth of $60 million would be subject to a 2% tax on the $10 million exceeding the $50 million threshold, producing a tax liability of $200,000. A household with a net worth of $4 billion would be subject to a 2% tax on the $950 million between $50 million and $1 billion, and a 3% tax on the remaining $3 billion, producing a tax liability of $109 million. This tax would be imposed in addition to any income tax or other tax liability, and the tax rate and base would not vary based on the taxpayer’s income for that year. As laid out in greater detail by Dawn Johnsen and Walter Dellinger in the 2018 Indiana Law Journal piece The Constitutionality of a National Wealth Tax, such a net worth tax would be constitutional.

--from letter to Senator Elizabeth Warren dated January 24, 2019, from Dawn Johnsen (Walter W. Foskett Professor of Law, Indiana University Maurer School of Law); Walter Dellinger (Douglas B. Maggs Emeritus Professor of Law, Duke University School of Law); Erwin Chemerinsky (Dean & Jesse H. Choper Distinguished Professor of Law, University of California Berkeley School of Law); Joseph R. Fishkin (Marrs McLean Professor in Law, University of Texas, Austin); H. Jefferson Powell (Professor of Law, Duke University School of Law); Laurence H. Tribe (Carl M. Loeb University Professor, Professor of Constitutional Law, Harvard Law School): Neil Kinkopf (Professor of Law, Georgia State College of Law); Pamela S. Karlan (Kenneth and Harle Montgomery Professor of Public Interest Law, Stanford Law School); Christopher H. Schroeder (Charles S. Murphy Professor of Law and Public Policy Studies, Duke University School of Law); Calvin H. Johnson (John T. Kipp Chair in Corporate and Business Law, University of Texas, Austin); Daniel Halberstam (Eric Stein Collegiate Professor of Law, University of Michigan Law School).

[Colonel_Buck]

What a hornet's nest if this tax moves forward.

https://www.foxnews.com/politics/elizab ... -questions

[notorial dissent]

What a hornet's nest if this tax moves forward.

https://www.foxnews.com/politics/elizab ... -questions

Current gov't, NCIH! The way the economy is going, who knows?

[Gregg]

I don't think its a serious proposal, she, like a lot of politicians, said something that she knows better than, but knows most people don't know better than, in order to get some headlines.

[JamesVincent]

Sounds more like a case of, hey, you've got too much money so we're gonna take some of it. Like Gregg said just a way to grab headlines and remind people that she's still trying to stick it to the man.

[Number Six]

David Stockman proposed something similar a few years ago: https://www.barrons.com/articles/david- ... 1381515461

If she can get bi-partisan consensus there may be a chance of this grown up proposal, as we see so much amateur hour stuff these days it would be a tough pill for the top wealth people to swallow.

I'd like to see full expansion of the IRS to give them all the resources they need to do their jobs.

[Colonel_Buck]

Just as night follows day, Bernie & Liz are trying to out-pucker each other.

https://www.foxbusiness.com/politics/be ... -not-exist

You can bet these percentages will go up as we get closer to the primaries next spring.

[AndyK]

They are getting insane.

Why not just roll back all the income tax rate changes since Ronald took office?

Also, since there's been talk about indexing capital gains to inflation, let's do it -- BUT then treat the gains as ordinary income.