Is the Warren tax unconstitutional?

[TalkRadio1]

As she officially kicked off her presidential campaign last weekend, Sen. Elizabeth Warren rallied her supporters behind her signature proposal: a wealth tax on the rich. The Massachusetts Democrat wants an annual charge of 2 percent on the holdings of anyone with more than $50 million in assets. Billionaires would be subject to a 3 percent tax, to “make sure rich people start doing their part for the country.” Polls show that Warren’s “ultra-millionaire tax” is overwhelmingly popular, with 60 percent of voters favoring it, including a majority of Republicans.

It is also probably unconstitutional. A legal challenge against it would immediately rekindle a debate first argued by James Madison and Alexander Hamilton. Our founding document says the federal government can levy only a few, very specific kinds of taxes. Warren’s plan is outside the rules.

Warren’s proposal would constitute a radical expansion of federal taxing authority. While Congress currently imposes a wide variety of open and hidden taxes and tariffs (including taxes on property transfers, payroll, inheritance, capital gains, dividends and corporate profits), this would be something new: forcing individuals to account for their assets and annually pay for having such wealth. It’s always possible that a future President Warren could pick a Supreme Court majority to uphold her wealth tax. But that would still require a transformative change to our reading of the Constitution.

https://jonathanturley.org/2019/02/20/is-the-warren-tax-unconstitutional/

 

[Rightguide]

It violates the principle of equal protection under the law.

 

[sharingfantasies]

I don't understand why, instead of increasing the taxes, they just don't close the loopholes. Just make them pay their fair share rather than increasing the tax but leaving the loopholes. As long as the loopholes remain, the rich will find ways to avoid paying their fair share no matter what the tax percentage.

 

[Mello_SixtyNine]

I'm also not a fan of Bernie's estate tax plan. Taxing money and property that was already taxed just because you drop dead is bullshit.

 

[o2baPrince]

I'm also not a fan of Bernie's estate tax plan. Taxing money and property that was already taxed just because you drop dead is bullshit.

When I am dead, what happens to my money is a moot point. But the thought that my kid might inherent a bunch of my money, untaxed, without working for it, seems equally bullshirt to me. What makes his receiving untaxed income so special? That his dad paid taxes when he was alive?

I do wonder about the income inequality as a significant problem. The middle class shrinks, the poor get poorer, and the wealthier get wealthier, simply because they were wealthy to begin with.

 

[HisArpy]

I don't understand why, instead of increasing the taxes, they just don't close the loopholes. Just make them pay their fair share rather than increasing the tax but leaving the loopholes. As long as the loopholes remain, the rich will find ways to avoid paying their fair share no matter what the tax percentage.

I'll tell you why.

Most individuals classed as "rich" are actually businessmen. Take Bezos for example, his company Amazon makes billions.

Yet Amazon pays almost no income taxes. Why?

Because the tax code recognizes that in order to make those billions Amazon has to have company assets. Without company assets they're not actually a "corporation".

So, Amazon has to have assets. They have trucks and employees and pay utility bills and carry liability insurance and so on. All of those things are deductible from their sales. In addition to those deductions they also get to deduct what's called depreciation on their assets like those trucks as well as the buildings they own. The depreciation can equal or exceed the bottom line net cash income after expenses on the income statement if you have enough of it.

Which means you pay no taxes and can bank the cash from the bottom line.

Then there's the individual income tax. One of the deductions on the individual 1040 tax form is for your mortgage interest. Own an expensive enough house and you can have enough of a mortgage interest deduction to seriously downgrade your adjusted gross income and pay less in taxes.

Trust me, there's a reason rich people own expensive homes.

In the end, it's not that the "rich" are given some sort of break. It's knowing what's allowed and what's not allowed and how to play those numbers against what you earn.

For another example closer to home in the tax brackets: Let's take a guy who is in business and has a bottom line net income of 65k after legit business overhead and expenses. You'd think he would pay taxes on that 65K, and under normal circumstances you'd be right.

But, what if, he had himself a business vehicle which cost 150K to buy. You could think this is a semi truck if you want. Vehicle depreciation on the straight line method is 20% each year for 5 years (30K/yr in this case). With that, he can reduce his tax base to 35K.

Now, let's say he's a sole proprietor and is married. His 35K is further reduced under the new tax plan by 25K for the personal deduction leaving 10K taxable. There are some tax add-ons which have to do with self employment tax which will be based on the 35K but the upshot when all of that is done is that he's going to pay somewhere around 45% of that 10K or about 4500 dollars in taxes. If he has kids, it's even lower. (Child tax credits can reduce that even further and he could wind up with a refund even if he pays NOTHING.)

Meanwhile his twin brother who has a good job with Amazon and earns a gross salary of 65K pays $9500 in taxes after the personal deduction for himself and spouse.

When you know how to use the tax code to your advantage, you pay less. If you don't, you pay more. "Rich" people teach their kids this stuff. The rest of us either learn it the hard way or, often, never.

It's not about being "rich", it's about being smart. And, if the government takes away those "loopholes" like asset depreciation, then people in business won't purchase assets when they need them because they either won't be able to, or just won't because it makes no business sense to spend the cash. This also hurts the economy because those asset "goods" aren't being sold and further pulling the economy down.

It's not as simple as saying "close the loopholes" or "pay your fair share". Without those loopholes YOU may not have a job at all because the company you work for might not be able to afford to hire you. Then where would you be?