'Fair Share Amendments' and Other Wealth Tax Schemes—Are They Constitutional?

This brings us to the socialist notion of a wealth tax, and the so-called "fair share amendment."

As a former finance and investment guy, I have long — and vehemently — argued against the notion of a wealth tax, which is a levy on an individual’s total net worth; assets like real estate, stocks, bonds, cash, art, and businesses, minus liabilities. 

Unlike income taxes, which target earnings, or realized capital gains taxes, a wealth tax applies to the value of what you own, typically assessed annually. 

While the left pushes wealth-redistribution schemes to counter wealth concentration, reduce inequality, and other such socialist rhetoric, the key question is whether or not such an idea is constitutional. We'll get there in a minute.

While the left's utopian dream of a wealth tax designed to — dare I say steal? — accumulated wealth from "the rich," simply because they own it, is far from a new idea, recent efforts by the likes of Sen. Elizabeth Warren (D-MA) and other socialist politicians continue to surface.

Political commentator and George Washington University Law School Professor Jonathan Turley weighed in on the subject in a Friday article titled "Massachusetts Teachers Demand New Wealth Tax": 

I have long opposed wealth taxes based on both constitutional and practical grounds. When Elizabeth Warren pushed her own wealth tax, I noted that the high starting income or wealth levels would likely be lowered with time if Congress were ever allowed to cross this constitutional Rubicon. 

The Massachusetts Teachers Association (MTA) is now demanding an amendment to the state constitution to tax the “wealth of the richest 1%” to pay for free public college. Previously, the state passed a constitutional amendment to place a 4 % tax on income above $1 million. This would add a new wealth tax to that earlier “Fair Share Amendment.”

Max Page, the MTA president, declared, in socialist utopian fashion:

If we are serious about social and economic justice and nurturing a culturally rich and welcoming state of involved citizens, we will provide all residents with the best vehicle for a prosperous future – public education.

Page's statement is not only laughably absurd; it couldn't be more antithetical to Americanism. 

Setting aside the irrationality of "social justice," "economic justice" is simply another iteration of the left's call for massive wealth redistribution. 

Even more ridiculous, Mr. Page's suggestion that public education is the best vehicle for a prosperous future in America couldn't be more delusional. Toss in the sorry state of the no-longer-hallowed halls of academia and the Marxist views of smug, bubble-dwelling professors, and you get the point.

Is a Wealth Tax Constitutional?

Simple question — without a simple answer. So I decided to check into opposing views. 

First up, an opinion from the Roosevelt Institute:

Why a Federal Wealth Tax Is Constitutional

A federal wealth tax can help level the playing field of our unequal society and promote shared economic prosperity. When wealth taxes have been proposed in national campaigns of recent years, they generated strong public support and broadened the conversation over the future of progressive tax policies. However, critics of wealth taxation argue that a wealth tax could be struck down by the Supreme Court because of constitutional provisions that delineate Congress’s power to tax. Namely, critics undermine federal wealth tax proposals by relying on the “apportionment rule,” which requires certain taxes to be apportioned among the states according to their populations.

In “Why a Federal Wealth Tax is Constitutional,” Ari Glogower, David Gamage, and Kitty Richards contend that the apportionment rule, a vestigial relic of the founders’ compromise on slavery, does not interfere with Congress’s ability to legislate a tax on an individual’s net wealth. The authors describe the main constitutional provisions that give Congress its broad taxing authority, situate those provisions in the constitutional structure and historical context, and analyze Supreme Court precedent to demonstrate that an unapportioned wealth tax is constitutional.

While I'm neither a constitutional lawyer nor an expert on Congress's authority to legislate taxes on an individual's net wealth, I do have an opinion or two on the left-wing notion of "leveling the playing field." 

ALSO CHECK OUT: 'Radical Chic': Is the Left's Embrace of Marxism the Ultimate Virtue Signal?

MSNBC Guest Claims DEI Creates 'Level Playing Field' — Why That Worn-Out Trope Is Patently False

Hypothetically, if we were to "level the playing field" by equally dividing the cumulative wealth of all Americans and redistributing it equally, how long would it take for the successful among us to rebuild their wealth, while the less successful among us squander theirs? I don't mean to sound harsh, but think about lotteries, for example, which, in my opinion, are tantamount to a tax on stupid.

Anyway, here's a 2021 counterargument to the notion of constitutionality of a wealth tax from the National Taxpayers Union Foundation:

Is a Wealth Tax Constitutional?

Though France canceled its wealth tax in 2018 after facing a brain drain, capital flight, and revenue losses, and all but three European nations have repealed theirs after concluding it was a policy failure, the idea remains a priority for the American left. 

A wealth tax would be an unapportioned direct tax and therefore unconstitutional. The U.S. Constitution allows the Congress to “lay and collect Taxes, Duties, Imposts and Excises” with two explicit conditions relevant here. First, all duties, imposts, and excises “shall be uniform throughout the United States.” Second, “Capitation, or other direct, Tax[es] shall be…in Proportion to the Census.” In short, all federal taxes must be geographically uniform but direct taxes must be apportioned.

Apportioned means that a tax is levied in proportion to each state’s population. If California constitutes 12 percent of the U.S. population, then Californians pay 12 percent of an apportioned tax. If Mississippi constitutes one percent of the U.S. population, then Mississippians pay one percent of an apportioned tax.

A wealth tax ... would be a tax not on accessions to wealth but wealth itself, and not at the time of realization but before it. Most court decisions and observers over the past two centuries have conceded that a tax on land and property would be a direct tax, and a wealth tax would encompass the unrealized gain in the value of land and property, such as homes, farms, and personal assets. 

Taxing wealth is not taxing income, as evidenced by the establishment of a separate tax regime that more resembles property tax assessment mechanisms, the lack of realization events, and that the legal and economic incidence of a wealth tax falls on the same person.

As a former Certified Financial Planner, my focus was on wealth accumulation and estate planning. I mention it only to make the point that there are numerous legal methods for wealthy people to shelter their accumulated wealth from income taxes and estate taxes — in many cases by gifting assets to less-wealthy family members, and qualified charitable causes or institutions. 

And in response to a wealth tax, if it were to become a reality, the ability to legally reduce one's gross estate is easily doable via various estate-reduction strategies. 

The Bottom Line

It's inconceivable that the Democrat Party will ever stop trying to separate wealthy people from as much of their money as the Democrats can get away with. 

Democrat political campaigns universally trot out inequality and faux moral issues to convince the low-information among us that the more money "the rich" have, the less money available for the less fortunate. 

Leftist rhetoric like “The rich aren’t paying enough” or “Corporations dodge taxes” will likely be with us until the end of time — or the demise of the Democrat Party.

Let's hope the latter occurs before the former.