In a lengthy WSJ article on Democrat proposals to tax wealth, my friend and UCLAW colleague Jason Oh is quoted as offering a practical cautionary note:
For the richest Americans, Democrats want to shift toward taxing their wealth, instead of just their salaries and the income their assets generate. The personal income tax indirectly touches wealth, but only when assets are sold and become income. ...
In the real world, a wealth tax would emerge from Congress riddled with gaps that the tax-planning industry would exploit, said Jason Oh, a law professor at the University of California, Los Angeles. For example, if private foundations were exempted, the wealthy might shift assets into them.
“We’ve never seen in the history of taxation a pristine tax of any form,” Mr. Oh said. “People who want to pursue a wealth tax for the revenue may be a little disappointed when we see the estimates roll in.”
Bismarck's famous aphorism--"Laws, like sausages, cease to inspire respect in proportion as we know how they are made"--applies in spades to tax laws. You just know any bill will come out encumbered with exclusions and exemptions.
It's also worth remembering the history of the Alternative Minimum Tax. When introduced in 1966, Congress told us that the predecessor to today's AMT would impact only 155 high income taxpayers. At its peak, prior to the 2017 tax reform law, 10 million taxpayers per year were potentially subject to the AMT and therefore were required to calculate whether they owed the AMT. About 5% of all taxpayers ended up owing AMT.
A wealth tax is almost sure to expand equally until it covers millions of middle and upper middle class taxpayers.
