Biden’s plan to ‘tax the rich’ likely won’t stop with billionaires

Announcing its new tax plan to raise an additional $1 trillion, President BidenJoe BidenPelosi: ‘I fear for our democracy’ if Republicans win Jan. 6 panel votes in the House to advance Navarro contempt proceedings, Scavino Biden’s ‘careless remark’ on Putin’s incense GOP MORE repeated his oft-expressed assurance that “i am a capitalist. The concern raised by his new plan, however, is not one of capitalism but of constitutionalism. Although not addressed in the president’s remarks, Biden’s White House plans to introduce a new type of income tax it would fundamentally change the powers of taxation in the United States. Taxing the “unrealized gains” of billionaires is likely to be popular, but it may also be unconstitutional.

It’s hard for the average American to worry about the tax burden of Jeff BezosJeffrey (Jeff) Preston BezosNASA announces new contest for lunar mission contracts MacKenzie Scott says she’s donated nearly B to nonprofits MacKenzie Scott makes largest donation since her wish to donate the most of his wealth MORE or the roughly 700 other billionaires who would be subject to this change – but it would be a new tax that, if successful against billionaires, is unlikely to stop with them.

Politicians have long turned to “Eat the rich!” battle cry when things don’t work out politically or economically. During the 2020 Democratic presidential primaries, Senator. Elizabeth WarrenElizabeth WarrenEnergy and Environment – Biden Seeks Nearly $1 Billion in Funding for EPA Environmental Organizations Unveil ‘Green New Deal Commitment’ for 2022 Candidates (D-Mass.) pledged a wealth tax, to announce that she came after”diamonds, yachts and Rembrandts too.” Then-New York Mayor Bill DeBlasio, another Democratic candidate at the time, was barely registering in the polls when he promised this “we will tax the rich.”

Now, facing record highs in the polls (including only 33 percent endorsing his handling of the economy), President Biden takes up the same club of class struggle. Indeed, in defense of this new tax, Sen. Bernie SandersBernie SandersEnergy and Environment – Biden Seeks Nearly $1 Billion in Funding for EPA Environmental Organizations Unveil ‘Green New Deal Commitment’ for 2022 Candidates recently compared American billionaires to Russian oligarchs.

There’s no doubt that taxing billionaires always makes good policy, but it can also make bad business when an income tax isn’t based on actual income. Like today’s popular call to seize yachts of Russian oligarchsthe gratuity of taking from the “super rich” can be lost if you have to return it.

The Biden tax would generate about $360 billion in new revenue over the next decade. It would target households worth more than $100 million that don’t already pay 20% tax to raise the tax burden to that level on their “full income.” However, what the Biden administration calls “full income” would be subject to the additional tax.

Income tax focuses on the actual income or earnings acquired by citizens in a given year. This includes “capital gains” when you sell an asset for more than its original purchase price. It is “realized” when you sell it.

Democrats are now looking for “unrealized gains” even if an asset has not been sold and could decline in value. It’s a more sophisticated version of Warren’s wealth tax, but it’s arguably just as unconstitutional.

The Constitution originally imposed a narrow limit on the taxing authority of Congress. First article, Items 8 and 9, prohibits all direct taxation unless it is “divided among the several States” in proportion to the population. In other words, it must be distributed evenly among every person in every state.

In 1895, Congress sought to impose an income tax, but was stopped by the Supreme Court in Pollock v. Farmers’ Loan & Trust (1895). The court prohibited any such tax “on owners of property in respect of their property, whether immovable or personal, or income yielded by such property, the payment of which cannot be avoided”.

This case led to the ratification of the 16and Amendment, which allows Congress to levy “income taxes” without apportionment. Yet it expressly states that “Congress shall have power to lay and collect taxes on incomewhatever the source, without distribution among the different States, and without regard to any census or enumeration.

Biden, however, is now claiming the right to tax not just income but also assets. Rather than waiting for a taxpayer to sell an asset and tax those gains, they want to start collecting taxes now.

The Biden The White House insists it is simply “a prepayment of the tax obligations these households will owe when they later realize their gains. … This approach means that the wealthiest Americans pay taxes as they go, like everyone else.” , and eliminates ineffective income protection for decades or generations.” Viewing the tax on assets as a prepayment still makes it a tax on current wealth rather than income.

There is also the heavy logistical task of valuation and why certain assets may be counted against other assets.

The same is true for a house. A family home will likely increase in value, and that value may be levied as a property tax by states. Yet the federal government cannot also view this value as a “prepayment of tax obligations” on an asset that could lose value or not be sold for decades.

Targeting billionaires is a brilliant way to get the public to accept a new kind of tax. Once authorized, however, it can then be used on any asset and against any tax bracket to tax “unrealized gains”. If history shows anything, it’s that government tends to operate like a gas in an enclosed space: enlarge the space, and the gas will fill it evenly.

Taxing 700 fat cats is not going to wipe out the government’s colossal debt. This would require tapping into new, untapped revenue streams. The unrealized gains would open up a massive amount of potential taxable assets. Going from 700 billionaires to 22 million millionaires would be based on the reasoning that the rich are not paying their fair share. After all, many hold the same stocks or shares or assets. With nearly 60% of citizens paying no income taxthe need for these revenues will only increase.

Democrats have been advocating for a wealth tax for years. Biden’s proposal is as clever as it is cynical. The White House is betting it picked the least popular group to target in order to get average citizens to accept a new kind of tax; once accepted for billionaires, the matter then becomes a matter of discretion as Congress taps into other income brackets.

During the 2020 Democratic primary debate, Warren received applause when she rubbed her hands and happily explained how she would take some of another candidate’s wealth. John DelaneyJohn DelaneyLobbying world Democrats in Maryland target lone Republican in redistricting plan Warning: Joe Biden’s ‘eat the rich’ speech could come back to bite you MORE. Delaney was worth $65 million, so he would arguably miss Biden’s threshold. But Warren’s theatrics show it’s unlikely to end with “The 700.” She treated Delaney’s wealth as if it belonged to her and others, an irresistible boon of public funds.

During the “reign of terror” of the French Revolution, Pierre Gaspard Chaumette, president of the Paris Commune, rallied the crowd by quoting the French philosopher Rousseau that “when the people have nothing left to eat, they will eat the rich”. As 1793 shows, anarchic measures rarely stop at the first targets. No one is suggesting that millionaires will be transported in guillotine carts. However, taxation can prove an insatiable appetite – when the feast of the rich begins, it is unlikely to end with a first course of billionaires.

Jonathan Turley is the Shapiro Professor of Public Interest Law at George Washington University. Follow him on Twitter @JonathanTurley.