Property, Obamacare, and Liz Warren's Wealth Tax

If one believes in government, even if only that it’s a “necessary evil,” then it’s rational to believe in taxes. Supreme Court Justice Oliver Wendell Holmes, Jr. observed that “Taxes are what we pay for civilized society.” But taxes don’t go to “civilized society,” they go to government, and there’ve been governments that aren’t all that civilized. But because Holmes worked for the government, we can say that his adage is “close enough for government work.” 

For a nation founded on the principle of a limited central government, the power to tax in these United States is fairly unlimited. However, one kind of tax that does have some limits placed on it is the “direct tax.” The original Constitution touches on direct taxes in two places, the first being Article 1, Section 2, Clause 3, and the second being Article 1, Section 9, Clause 4, and both places stipulate that direct taxes must be levied in accordance with apportionment, i.e. population.

Because it is classified as a direct tax, an income tax would need to conform to the apportionment requirement of the Constitution. So, back in 1913 the several States ratified the 16th Amendment to get around this requirement and usher in our current beloved federal income tax, which is levied “without apportionment among the several States, and without regard to any census or enumeration.”

Because it is a direct tax, a wealth tax levied on a taxpayer’s net worth, would face the same constitutional scrutiny as did the income tax. Even so, Americans who think that the Supreme Court will protect them from the proposed wealth tax of Democrat presidential candidate Liz Warren might remember the lead-up to the enactment of ObamaCare.

In August of 2009, the Washington Post ran “Constitutionality of Health Insurance Mandate Questioned” by attorneys David Rivkin and Lee Casey, who wrote that the “uninsured would be required to buy coverage... for no other reason than that people without health insurance exist. The federal government does not have the power to regulate Americans simply because they are there.”

But Congress does have the power to tax Americans because they exist; it’s called “capitation,” the head tax, and it’s treated as a direct tax by the Constitution. In the big ObamaCare case, NFIB v. Sebelius, the Supreme Court considered direct taxes and capitation. There are ten instances of “direct tax” in four contiguous paragraphs in the ruling, and it gives a gloss of the judicial history concerning the direct tax. Here are some salient outtakes:

According to the plaintiffs, if the individual mandate imposes a tax, it is a direct tax, and it is unconstitutional because Congress made no effort to apportion it among the States… A tax on going without health insurance does not fall within any recognized category of direct tax. It is not a capitation… The shared responsibility payment is thus not a direct tax that must be apportioned among the several States.

The issue In NFIB then became whether or not the Constitution gives Congress the power to command Americans to buy something, but not all Americans, just those who pay income taxes. The Court skirted this issue by ruling that the command is not a command but a choice, and that the penalty for not making the “right” choice (i.e. to buy health insurance) is not a penalty but a tax.

In June of 2012, SCOTUSblog ran “We won everything but the case,” an elegant review of NFIB by Ilya Shapiro, who wrote:

Moreover, this voluntary unicorn-like tax is not a “direct” tax -- which the Constitution says must be drawn such that each state pays in proportion to its population -- because it’s neither a tax on property nor a “capitation” (defined as “a tax that every­one must pay simply for existing”).  Instead, Roberts explains, this novel tax is triggered by a specific circumstance: “earning a certain amount of income but not obtaining health insurance.”

The point of revisiting ObamaCare is to show that the Supreme Court can redefine things to get a desired outcome. The Court can define a penalty as a tax, and a command as a choice, as was done in NFIB. So it’s not too crazy to think that government can find ways to enact a wealth tax, maybe by piggybacking it on top of the income tax. For the swamp, the power to tax must be absolute and unlimited.

Shortly after she announced her wealth tax, candidate Liz Warren categorically stated that “capitalism without rules is theft.” It’s rich being lectured about theft by the likes of Liz Warren, who lied about her genetics in order to get positions that should have gone to minorities. I’ll tell you what theft is, lady: it’s when government takes more than half of your income. That’s theft, and it makes no difference if the government calls it “taxes.” In a compelling Bloomberg video, the interviewer pressed Warren about the difficulty of enforcing her wealth tax, to which she replied:

Let’s start with the fact that the way this is written says your wealth wherever held. So moving it to one of the islands or moving it to Switzerland, that’s not going to get you out from underneath the tax. There’s no advantage to taking your diamonds or your art or your yacht outside the United States.

What stood out for this writer in Warren’s wealth tax is the inclusion of art. If you think it rational to tax art, then read my 2013 article. What the media should press Warren on is: what is her “theory” of taxation? That is, why do we tax what we tax? If it’s reasonable to levy a property tax on art, then why not on HDTVs, on furniture, hell, on all property? For statists like Warren, such questions are silly, because everything should be subject to taxation.

Direct taxes are primarily property taxes. The right to own property is a big deal in America. Jefferson’s “Life, Liberty and the pursuit of Happiness” had as one of its roots this: “life and liberty, with the means of acquiring and possessing property.” But in what sense can it be said that you can ever really “own” any property in America if every year you must continue paying for it with property taxes? Liz Warren needs to answer that, because she wants to open up a whole new realm of federal taxation.

One quick place to get a general idea of what the feds tax is a chart in the back of each year’s 1040 booklet from the IRS. (For 2017, it’s on page 112, or to see the chart alone, click here.) As I read the chart for Income and Outlays, only about 7 percent of the fed’s revenue comes from taxing things that might possibly come under the direct tax: “Excise, customs, estate, gift, and miscellaneous taxes.” The reason property can be taxed if it is part of an estate is because an estate involves a transfer of ownership; it’s a transaction.

In his dissent in NFIB, Justice Scalia’s wrote: “[T]he meaning of the Direct Tax Clause is famously unclear, and its application here is a question of first impression that deserves more thoughtful consideration than the lick-and-a-promise accorded by the Government.” Shouldn’t Congress and the several States at long last be clearing up such issues? What we should be doing is creating limits to how much government at all levels can take in taxes. The only limit we have now is… everything you have.

Jon N. Hall of ULTRACON OPINION is a programmer from Kansas City.

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