The Obstacle to the Wealth Tax
This article is part of the wealth tax series.
Wealth tax advocates will be attacking the Supreme Court’s 1895 Pollock opinion which maintains that a tax on property is a direct tax.
They have to do so if they want to enact a wealth tax because for the last one and a quarter century, Pollock has protected Americans’ private property from government mobsters.
The U.S. Constitution (art. 1, sec. 2, cl. 3) says that any direct tax must be apportioned among the States. A direct tax means that a federal tax is imposed directly to the taxpayer. At least that’s what it’s supposed to mean. I detail in Organic Wealth how the Courts have misconstrued the meaning of direct taxation to the point where they couldn’t even define it.
Having courts decide if a particular tax was direct or not based on how easily it would be apportioned is not what the Founders intended. This is how the income tax became legal even though it clearly is a direct tax. Later, the 16th Amendment was enacted to remove all doubt:
The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.
Early on in our republic’s history, all revenue to the federal government was from indirect taxation. This was revenue raised from commerce where citizens paid the tax which was included in the price of an item. The merchants would then forward the tax to the government. These were all voluntary transactions while direct taxes are compulsory.
According to Pollock, taxes on property are direct taxes and have to conform to apportionment. This wouldn’t be an easy task. If the goal is also uniformity or fairness, many believe it’s virtually impossible to implement.
A tax that requires apportionment simply means it must be proportional to each state’s population percentage. Since California, for instance, has 12% of the U.S. population, then any direct tax on citizens of California cannot exceed 12% of the total raised across the country. So, if the federal government wanted to raise $100 billion from wealth taxes, they could only take $12 billion from citizens of California.
As you can imagine, there are more billionaires residing in the Left Coast State than any other state. According to this 2020 Forbes article, California has 165 billionaires as residents. So it would be an unfair tax by the states with very few or no billionaires. You certainly couldn’t call it an ultra-billionaire’s tax. There are seven states without any billionaires: Alabama, Alaska, Delaware, New Hampshire, New Mexico, North Dakota and Vermont.
The difficulty in implementing such a wealth tax requiring apportionment is why there will be an all-out assault on the Pollock opinion. This onslaught will undoubtedly require misrepresenting history and the actual meaning of direct taxation. They will have to invent facts in order to make us all believe their false narrative.
I go into great detail within Organic Wealth in revealing historical truths that destroy many of their arguments. In future posts, I will take some of their assertions and reveal just how wrong and dishonest their claims to be.
Wealth tax supporters contend the Founders’ intent was for any direct tax to be easily apportionable. People who make this claim say if it’s not easy to implement, then it should be considered an indirect tax. The only Constitutional requirement with indirect taxation is uniformity. A wealth tax is uniform if it applies to the objects of the tax equally. In other words, if they want to tax billionaires at 2%, then it applies uniformly to everyone who has a net worth that qualifies.
Purchase Organic Wealth to learn how the Founders didn’t intend for direct taxes to be easily apportionable as they argue. The claim of otherwise is made by those who desire a far reaching government to tax as it desires. Organic Wealth proves them all wrong.
You can read more about the Pollock case in this post and much more in Organic Wealth. The book not only covers this topic but others as well such as how wealth is created, how we can have unlimited wealth and how anyone can create wealth from thin air.