Comment by pqtyw
5 days ago
Doesn't this tax only apply to "net investment income"/realized gains? Billionaires technically already have to pay it at a higher rate. And well they generally do? I mean when they personally actually sell stock and or receive dividends and interest.
Most of the wealth being in stock is really tricky. You can't really tax stock ownership, but at the same time stock can be leveraged against business deals (Musk for example bought Twitter with largely stock, without having to sell it first and therefore being subject to tax), and you can take out loans with stock as collateral.
It's not that tricky. All you have to do is make it a taxable event to collateralize stock.
Should we similarly tax collateralizing real estate as in home equity loans?
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How? That makes little sense to me from an implementation standpoint.
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Why does it matter? It eventually gets taxed through estate tax and at a higher rate than income. This obsession with taxing them _now_ only makes sense if the point is to punish the the rich.
Agreed. For the revenue tax activists want from billionaires, it would necessitate a wealth tax, which I believe is unconstitutional. The non-profit tax exemption fight is about "income taxes" which billionaires already have to pay (but avoid). So it is an apples-to-oranges comparison.
> it would necessitate a wealth tax, which I believe is unconstitutional
I take it you haven't heard of property taxes.
I'm not a lawyer but I do not consider a property tax to be the same thing as a wealth tax.
If I own a house or condominium in San Francisco, at a fundamental level I do not own the land or space the residence is sitting on. "Ownership" is basically a lease of the parcel from the city. The house structure is an improvement on leased land; this ties the property tax calculation to the value of the structure. The property tax is the rent on the land/space. I believe this is the constitutional justification for property taxes (no opposition from me).
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The Supreme Court explicitly allowed property taxes in Pollock decision. They haven’t for wealth taxes (they still might allow it but they also might not).
A federal property tax is also unconstitutional.
what is unconstitutional about a wealth tax?
>> what is unconstitutional about a wealth tax?
Article I, Section 9, 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"
A wealth tax is generally considered to be a direct tax. If you wanted to enact one at the federal level, my understanding is that it would have to be done in proportion to the census. So, given that Mississippi is around 1% of the total US population, Mississippi would have to pay 1% of the wealth tax. Mississippi is the poorest US state, so that would be a very regressive tax.
An income tax is also considered to be a direct tax, that's why it took an amendment to the Constitution to enact one.
The Constitution applies to taxes at the federal level, not state. States could enact a wealth tax the same way they enact property taxes now (depending on their state Constitutions). The problem for them is that wealth is a bit more mobile than property.
And yes there are arguments about what a direct tax really meant in the language at the time the Constitution was written, there are arguments that the income tax should have been legal without an amendment. But that's not how it went down.
It’s not totally clear if it would be but here’s a summary: https://city-countyobserver.com/the-constitutionality-of-a-w...
I'm not a lawyer but my reasoning is this:
- as far as I know, double taxation by any given entity (Federal Gov) is unconstitutional
- a given dollar is taxed once as income. A federal wealth tax on the remainder of that dollar would be double taxation.
That does not prohibit the Federal Gov from taxing once, and your residential state from taxing you a second time.
There are other arguments about "direct taxation" I don't fully understand.
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