Biden’s great wealth tax? unconstitutional News-thread


President Joe Biden


Evan Vucci/Associated Press

One part of President Biden’s budget that deserves more attention is his stealthy estate tax, because it seems unconstitutional. He sells it as a 25% “minimum tax” on billionaires’ income, but see the fine print. The tax would apply to “those with a wealth of more than $100 million,” while covering “all their income, including estimated assets.”

Little problem: appreciated assets are not income. The Constitution prohibits the federal government from imposing “direct taxes” unless they are apportioned among the states based on population. To get around that, Congress in 1909 passed the 16th Amendment, which for a century has allowed the feds to “lay and collect income taxes.”

What is income, exactly? That question may be trickier than it sounds, since the IRS says income includes fringe benefits, plus “the fair market value of the property or services you receive in the barter.” However, it is relatively easier to say what income is not. If you own a trendy and expensive modernist house, stock or painting, it’s not income simply when the market value increases.

In a notable 1920 case, the Supreme Court considered a shareholder who received additional shares as a dividend. “We are irresistibly drawn to the conclusion,” said the majority in Eisner v. Macomber“that neither under the Sixteenth Amendment nor otherwise has Congress the power to tax without proration a true stock dividend made lawfully and in good faith, or the earnings accumulated therefrom, as shareholder income.”

Later judges reduced eisner in a way, but the principle is sound, and Mr. Biden wants to go much further by taxing asset appreciation when owners do nothing at all.

Wonderland: If Donald Trump and Joe Biden are the 2024 presidential candidates, the West Virginia senator, or someone, will enter the race. Images: AP/Reuters/Zuma Press Composition: Mark Kelly

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It appeared in the print issue of March 11, 2023.


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