Sen. Elizabeth Warren’s proposed wealth tax is either unconstitutional or regressive. Jibran Khan writes:
Because a direct tax must be “apportioned among the several States” according to “the Census or Enumeration herein”, the total revenue of the tax would have to be decided beforehand by the government, and then apportioned to each state by population, not by any wealth-related measure. So if a state contains 10 percent of the national population, it will pay 10 percent of the tax, regardless of wealth.
As Matthew Franck pointed out on Bench Memos in 2012 (emphasis added):
It gets worse. Take two states close to one another in size. Maryland, in the 2010 census, had 5,773,552 people, or 1.87% of the population, while Missouri had 5,988,927 people, or 1.93% of the nation. Pretty close, right? Missouri residents, collectively, would have to pay more than Marylanders under Altman’s wealth tax. But according to the “Quick Facts” at the Census Bureau, Maryland in 2010 was a much wealthier state than Missouri. Incomes were higher in Maryland, with $34,849 per capita, as against $24,724 in Missouri, and $70,647 median household income in Maryland as against $46,262 in Missouri.
What about the wealth Altman wants to tax? Take real estate. Home ownership rates were about the same (69% in Maryland, 70% in Missouri), but housing values were $329,400 in Maryland, and only $137,700 in Missouri. Yet according to the constitutionally required formula, Missourians collectively will have to pay about the same, or a little more, in federal wealth tax, than Marylanders. This means that the tax rates on assessed values of property will have to be much, much higher in Missouri than in Maryland, in order to raise the same quantity of revenue.
Not only would this tax system put a relatively heavy burden on poor states, the fact that tax incidence is determined by population means that the wealthy can move their assets to states with different tax burdens.
[Jibran Khan, “Elizabeth Warren’s ‘Wealth Tax’ Is Unconstitutional,” National Review, January 24]