Is Elizabeth Warren’s Proposed Wealth Tax Unconstitutional?

Elizabeth Warren

By James Freeman

As she seeks the 2020 presidential nomination of the Democratic party, Sen. Elizabeth Warren is giving voters fair warning that she does not accept the Constitution’s limits on federal power. On Thursday the former Harvard law professor unveiled a plan to extract wealth from the country’s wealthiest citizens. According to a press release from her Senate office:

United States Senator Elizabeth Warren (D-Mass.) today unveiled the Ultra-Millionaire Tax, a bold proposal to tax the wealth of the richest 0.1% of Americans. The legislation, which applies only to households with a net worth of $50 million or more, is estimated by leading economists to raise $2.75 trillion in tax revenue over a ten-year period.

For decades, a small group of families has raked in a massive amount of the wealth American workers have produced, while America’s middle class has been hollowed out. The result is an extreme concentration of wealth not seen in any other leading economy.

The “leading economists” cited by Team Warren are Emmanuel Saez and Gabriel Zucman from the University of California-Berkeley. Readers may recognize Mr. Saez as the sometime research partner of Thomas Piketty. Economists on both the right and the left have lately been poking holes in the Saez/Piketty research which purported to show a dramatic increase in levels of income inequality.

No doubt many economists will also explain in the days to come why the Warren tax would not raise as much as Messrs. Saez and Zucman expect and how it would distort investment and encourage capital flight from the United States. Ms. Warren implicitly acknowledges this last problem. Her plan includes “a significant increase in the IRS enforcement budget” and “a 40% ‘exit tax’ on the net worth above $50 million of any U.S. citizen who renounces their citizenship.”

For now, Ms. Warren is saying she will only confiscate a small percentage of wealth from the very richest Americans:

2% annual tax on household net worth between $50 million and $1 billion

1% annual Billionaire Surtax (3% tax overall) on household net worth above $1 billion

There are excellent economic arguments against this new tax plan. But today this column would like to focus on the illegality of the Warren scheme. Ms. Warren seems to understand this problem as well. Typically lawmakers announcing new legislation don’t feel the need to simultaneously try to rebut anticipated claims that the bill is unconstitutional. But the Warren press release links to two letters on the subject, each signed by various law professors at famous universities.

Read the rest here.