U.S. Senator Elizabeth Warren wants to become President. If elected, one of her plans is to implement a wealth tax. She said:
We need structural change to get our economy and our democracy back on track – and no billionaire is going to get in my way of fighting for it.[i]
While a wealth tax would bring in revenue, its most important effect might be fast-tracking a complete government takeover of the economy. Merely change some tax rates, some thresholds, and the government taxes everything into its own hands. Behold! The socialist dream of “the people” owning everything.
If we sleep while others work, then this scenario will become our reality. This article will teach you what the stakes are. You’ll learn these things:
- What a wealth tax is, and how it eats away at your wealth and financial security.
- How a wealth tax can be used to rapidly institute an actual socialist economy.
- What is blocking this tax, and the attempts to overcome the block.
- Steps to stop this “structural change” before it is implemented.
What is a wealth tax?
A wealth tax is a tax on what you already own, not on new income. An annual wealth tax means you get to pay it over and over again. Keep this going long enough and all of your wealth is taxed away – the government, bite-by-bite, dispossesses you.
Warren’s plan would create an annual wealth tax of 2% to 3% of everything that rich people own.
All I’m asking for is a little slice from the tippy, tippy top. A slice that would raise — and this is the shocking part, Jim — about $2.75 trillion over the next 10 years.[ii]
What would a wealth tax cover?
- To start, tax your bank accounts, stocks, bonds, and other sorts of financial instruments.
- Then comes taxes on real estate, starting with your house. If you’ve a farm then tax its land and improvements. Even the vacation retreat, or time share, gets taxed. Even though there could be constitutional concerns, wealth tax proposals generally include taxing real estate.
- Certainly, businesses and corporations are going to get taxed. This includes buildings, machine tools, inventory, and even the value of inventions, copyrights, and other intellectual property.
- And finally, tax personal property. Artwork, cars, even your wedding band have taxable value.
Of course, the government doesn’t like people who try to evade the tax man. Senator Warren says so.
So the way that this is written is to say is to say first all of going to tax all your assets wherever located around the globe. So if you were planning to move them to Switzerland or some island, doesn’t make any difference. They are all going to be taxed.[iii]
Why have a wealth tax?
Why a wealth tax? Its proponents don’t fully reveal their hand. Senator Warren touts a national day-care system, saying:
That’s money we need so that every kid in this country has a decent child care opportunity, has an opportunity for pre-K, has an opportunity for a decent school.[iv]
But national child care is merely political cover. Her progressive friends have more ambitious plans for wealth tax money, implementing a “universal basic income.” At his campaign site, presidential candidate Andrew Yang provides a decent definition of the term.
Universal Basic Income (UBI) is a form of social security that guarantees a certain amount of money to every citizen within a given governed population, without having to pass a test or fulfill a work requirement.[v]
Every U.S. citizen over the age of 18 would receive $1,000 a month, regardless of income or employment status, free and clear. No jumping through hoops. Yes, this means you and everyone you know would receive a check for $1,000 a month every month starting in January 2021.[vi]
That is, the government becomes everybody’s parent, providing each of us enough to get by. It pays if you work and if you don’t work. This is underscored by Kelsey Piper, writing for Vox:
“That is, instead of people working poorly paid jobs they hate, they’d feel able to work jobs that might be similarly poorly paid but which they love — founding a company, opening a restaurant, managing a community theater, making art, running kids’ programs. That’s a way UBI could avoid affecting the labor supply at all, while making the world a better place.”[vii]
That $12,000 per year figure is merely a starting point. Soon someone will notice that this is less than a “living wage,”[viii] and the cry will be for its equivalency, $30,000 per year or more.
Note that this money isn’t poverty relief. Everyone is supposed to get it, because it is meant to be the fulfillment of the second part of the socialist pledge,
“… to each according to his needs.”[ix]
Soon enough, this becomes your only income as what you have, and what you can get, is taxed away. That will fulfill the first part of the pledge,
“from each according to his ability.”[x]
When a wealth tax is combined with a universal basic income you easily get a socialist economy. The government takes all of the fruit of your labors. All you have left is the government-supplied, but guaranteed, income.
The power to tax is the power to destroy
Through a wealth tax, Senator Warren only wants “a little slice from the tippy, tippy top.” That little slice will surely, and rapidly, drain its victim dry. Do some simple math, where you are the target.
- 2% annual wealth tax: One-half of your wealth taxed away in 30 years.
- 3% annual wealth tax: One-half of your wealth taxed away in 22 years.
- 7% annual wealth tax: One-half of your wealth taxed away in 10 years.
- 12% annual wealth tax: One-half of your wealth taxed away in 5 years.
Although U.S. Senator Warren is thinking 2%, others hope for more. Thomas Piketty is the progressives’ favorite economist, because he has schemes for pauperizing the wealthy. He has an opinion about how stiff a wealth tax should be:
We are not going to wait until Jeff Bezos or Mark Zuckerberg reach the age of 90 before they begin to pay taxes. With the 3 percent annual rate proposed by Warren, a static estate worth $100 billion would return to the community in 30 years. This is a good beginning but, given the average rate of progression of the highest financial assets, the aim should undoubtedly be higher (5 to 10 percent or more).[xi]
That is, the government should eat these estates, these holdings (“return to the community”) in maybe a decade. This would be a vigorous implementation of the old socialist cry.
In this sense, the theory of the Communists may be summed up in the single sentence: Abolition of private property.[xii]
Before your children have grown up their college fund, your retirement money, and your bank accounts will have been devoured by the government. It gets still worse, for at some point you’ll find that you no longer have ready cash to pay these taxes. You’ll have to sell things, even your home, to pay up.[xiii]
Don’t think that only the very rich will be targeted by a wealth tax. All the money obtained from them will be consumed by expanded social programs. Once the rich are fully drained more victims will be needed. The wealth tax rules will get changed to include the “merely wealthy,” and then the “middle class.” This wealth tax is coming for all of us. It will tax away all of your wealth, not merely that of some wealthy person you never knew.
A wealth tax is a legal implementation of envy. Our envy will give us socialism, and in turn that will consume us. Quoting the great economist Ludwig von Mises:
More and more the policy of taxation evolves into a policy of confiscation. The aim on which it concentrates is to tax out of existence every kind of fortune and income from property, in which process property invested in trade and industry, in shares and in bonds, is generally treated more ruthlessly than property in land. . .
Nothing is more calculated to make a demagogue popular than a constantly reiterated demand for heavy taxation on the rich. Capital levies and high income taxes on larger incomes are extraordinarily popular with the masses, who do not have to pay them. . .
The destructionist policy of taxation culminates in capital levies. Property is expropriated and then consumed. Capital is transformed into goods for use and consumption. The effect of all this should be plain to see. Yet the whole popular theory of taxation today leads to the same result.[xiv]
What does Bible say?
A wealth tax would have the government take money from our richest people, all in the name of “income inequality.” The Bible has a word for that: envy.[xv] We want the government to act on our behalf, steal money from the rich in the name of “the people,” and give it to others. Each of us who supports a wealth tax are guilty of a mix of envy, covetousness, and encouraging lawbreakers (i.e., the government’s tax agents).
But isn’t income inequality itself a sin, and something that the government should address? According to the Bible, no and no. The Bible expects that some people will be rich, even wildly so, and that others will be poor. God rewarded Abraham with so much wealth that Abraham needed what amounts to an army to take care of it (Genesis 14:14). And Jesus used income inequality approvingly in the Parable of the Talents (Matthew 25:14-30). To read more on capitalism and monetary rewards, see the article Is Capitalism Immoral?[xvi]
The government is Gods’ minister of righteousness (Romans 13:1-4). This commission shows that it is answerable to God for its actions (Luke 12:42-48; 1 Corinthians 4:2). Stealing through a wealth tax isn’t right, and even if instructed to do so by popular vote.
The money obtained from a wealth tax is meant to implement a socialist economy. Socialism changes how society works. It breaks our morals, our families, and what we’re allowed to say or do. A socialist government not only moves the boundary stones (Deuteronomy 19:14; Proverbs 22:28), it throws them far into the sea. It is like the sin of Jeroboam, where he changed the peoples’ worship (1 Kings 12:26-33).
By every Biblical measure, a wealth tax is a license to steal, pressed into being by envious voters, so that the government may destroy our traditions, our freedoms, and our right to worship. A triple threat.
Wealth tax is currently blocked
A federal wealth tax would be a boon for starting a socialist economy. But it can’t become law because the Constitution forbids it. Or does it? The answer depends on whether we have an “originalist” or “activist” U.S. Supreme Court.
The fate of a wealth tax depends on what the U.S. Constitution means by “direct tax.” This phrase appears only twice in the U.S. Constitution, in Article I:
- Within Section 2: Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons.[xvii]
- Within Section 9: No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.[xviii]
Over time, the Court has come up with definitions for “direct tax.” Its first meaning was supplied through the 1796 case Hylton v United States. In it the Court had to decide if a federal tax on carriages was constitutional. Having no established meaning for “direct tax,” the Court invented one.
“The boundary, [between direct and indirect taxes] then,” he argued, “must be fixed by a species of arbitration, and ought to be such as will involve neither absurdity nor inconvenience.” Then followed HAMILTON’S distinction: “The following are presumed to be the only direct taxes: capitation or poll taxes; taxes on lands and buildings; general assessments, whether on the whole property of individuals, or on their whole real or personal estate. All else must of necessity be considered as indirect taxes.”
The court accepted HAMILTON’S reasoning and the three judges who delivered opinions took the stand that only taxes which could be apportioned should be considered direct.[xix]
The Court ruled that the carriage tax was constitutional, and that it was an indirect tax. Property couldn’t be taxed, but some income could.
Then came the 1895 case Pollock v. Farmers’ Loan & Trust Co. In it the Court had to decide if a federal tax on state and municipal bonds was constitutional. In its ruling the Court knocked down the tax, while redefining “direct tax” as follows:
[Chief Justice Fuller] then says that a tax upon the income derived from real estate is a tax upon real estate, because as Lord Coke says, “What is the land but the profits thereof ?” And therefore that the tax upon income derived from rents and real estate is a tax upon land, and that a tax upon land is a “direct tax ” within the meaning of the Constitution, and unconstitutional because not apportioned.[xx]
Property still couldn’t be taxed, and income derived from it also couldn’t be taxed. Subsequent events, like the adoption of the Sixteenth Amendment (income tax), have diluted the effects of the Pollock decision. However, its version of “direct tax” still holds in the legal community. The Pollock interpretation of direct taxes would likely prevent a wealth tax that targets stocks, bonds, and real estate.
Many scholars would like the Court to return to the Hylton version of “direct tax.” Other scholars, like Walter Dellinger, want the Court to go even further.
Devising a progressive tax system that effectively taxes the wealthy is notoriously difficult, but whether a wealth tax is part of that system should depend upon the policy choices of democratically elected representatives, not faulty constitutional understandings.[xxi]
That is, he wants the Court to rubber-stamp whatever Congress devises. That is effectively a “living Constitution,”[xxii] one that accepts whatever tyranny Congress may devise. Such a U.S. Constitution is worthless, as is the Court that implements it.
Senator Warren has many advisors intent on assuring her that this wealth tax is constitutional.[xxiii] Yet many of these scholars, such as Dellinger and Bruce Ackerman,[xxiv] also campaign for expensive social programs like a universal basic income. Does their opinion come from their social advocacy, or is it the other way around? They are conflicted witnesses, and their judgment on constitutional matters can’t be trusted. We really don’t know how good their advice is on this matter.
How would the U.S. Supreme Court rule on a wealth tax, and on the critical phrase “direct tax?” Since its precedents are disputed, there will be pressure to decide based on political goals. Pray for judges to resist political pressures to be activist, and instead to rule impartially (Leviticus 19:15).
What can we do?
Everybody can do something. Some have more time, or skills, and can contribute more keeping this wealth tax evil far from us.
Repent of envy. There are no grounds to take money from the rich simply because they have a lot of stuff. We understand that rich people are responsible to God for how they use their wealth. For example, they ought to be generous and wise. But that is a problem between them and their Maker, and doesn’t include Uncle Sam.
Everybody has time for prayer. We need God to have mercy on us, and his Church. We need peace from government persecution and from harassment by libertines and progressives (Genesis 19:4-11). We must be the righteousness that is a model for society (Matthew 5:14-16), the yeast of change that permeates society (Luke 13:20-21), so we bring the nations into obedience to Him.
Try a little light reading. There are summary articles to help you navigate through this issue.
- Learn about the disaster called socialism. The article To Know Socialism is to Hate It[xxv] will teach you what socialist leaders want to do to our economy, or families, and our right to worship. You may not want socialism, but socialism wants you. The less we all like socialism, the less we all want a wealth tax to empower it.
- Learn why capitalism is OK by God. The article Is Capitalism Immoral?[xxvi] will show you that God accepts capitalism, and that being even extremely wealthy isn’t a sin. Having money isn’t the issue, but rather being righteous and merciful in our dealings.
Get politically involved. If you have free time to affect the campaign season, here are activist things to do.
- Research the legislators and candidates. Does your legislator support, even advocate, a wealth tax? Do they agree with those who do? What you want is someone who is virulently opposed to a wealth tax. We don’t need more lukewarm, pleasing everybody legislators. Our opponents treat this tax like war, as the most important of issues. There is no room for compromise.
After you have done your research, spread it around. Get your friends, even your church, equally alarmed about this tax. Tell them who the good guys, and bad guys, really are.
- Keep after the legislators and candidates. Lobby your legislators to support you on this. Show them this article, and others, so they are informed and can’t say they never knew. Be a squeaky wheel, until they acknowledge with you that a wealth tax is a really bad idea, a non-negotiable issue.
- Go after the fellow travelers. A campaign has accompanying PR flacks, and maybe even scholars who wrote letters of support. These people also need to be pestered, so that their support of “the evil wealth tax” is considered a detriment, not a benefit. This creates the perception that a wealth tax isn’t an advantage, but rather a millstone about their candidate’s neck.
- Always label a wealth tax with pejoratives. It isn’t just a “wealth tax.” It is “legalized envy,” “license to steal,” “enabling socialism.” Where possible, use phrases like “socialist wealth tax,” or “envy tax,” or “socialist takeover tax.” After all, those who really want the tax are either misinformed and envious, or malicious and socialist. What they would do isn’t nice, so why play nice with words?
In our day, going before the U.S. Supreme Court has become a gamble. Because the Court is political, we don’t know if it will rule by law or by politics. It is best if a wealth tax law were never passed, and the Court not tempted to do the wrong thing. If it ever were ruled constitutional then we’d never really be rid of it. Things will go much better for us if a wealth tax is never tried.
[i] DeCosta-Klipa, Nik, Elizabeth Warren is clashing with billionaires over her wealth tax plan. But would it be constitutional?, Boston Magazine, January 29, 2019, https://www.boston.com/news/politics/2019/01/29/elizabeth-warren-wealth-tax-constitution
[ii] Axelrod, Tal, Warren: Billionaires should ‘stop being freeloaders’, The Hill, January 31, 2019, https://thehill.com/homenews/campaign/427967-warren-billionaires-should-stop-being-freeloaders
[iii] Schwartz, Ian, Warren on Wealth Tax: Assets Worldwide Will Be Taxed With A “Very High Rate of Monitoring, Auditing”, Real Clear Politics, January 25, 2019, https://www.realclearpolitics.com/video/2019/01/25/warren_on_wealth_tax_assets_worldwide_will_be_taxed_with_a_very_high_rate_of_monitoring_auditing.html
[iv] Axelrod, Tal, Warren: Billionaires should ‘stop being freeloaders’, The Hill, January 31, 2019
[vii] Piper, Kelsey, The important questions about universal basic income haven’t been answered yet, Vox, February 13, 2019, https://www.vox.com/future-perfect/2019/2/13/18220838/universal-basic-income-ubi-nber-study
[ix] Marx, Karl, Critique of the Gotha Programme, Chapter 1, 1875, found online at https://www.marxists.org/archive/marx/works/1875/gotha/ch01.htm
[xi] Piketty, Thomas, A tax on wealth is long overdue, Boston Globe, February 11, 2019, https://www.bostonglobe.com/opinion/2019/02/11/tax-wealth-long-overdue/AULwxlT7ZGu4uuB7dkpXTJ/story.html
[xii] Marx, Karl and Engels, Frederick, Manifesto of the Communist Party, Chapter II. Proletarians and Communists, Marx/Engels Selected Works, Vol. One, Progress Publishers, Moscow, 1969, pp. 98-137, https://www.marxists.org/archive/marx/works/1848/communist-manifesto/ch02.htm
[xiii] In one scenario an owner sells stocks to satisfy a 3% wealth tax on them. Because of income taxes, and capital gains taxes, due on the stock sale a total of 20% of the stock must be sold to satisfy that 3% tax.
See the article by Adler, Hank, 70 Percent Income Tax, 3 Percent Wealth Tax, Townhall, January 28, 2019, https://townhall.com/columnists/hankadler/2019/01/28/70-percent-income-tax-3-percent-wealth-tax-n2540324.
[xiv] Hayward, Steven, Taxation, or Confiscation?, Power Line Blog, March 12, 2019, https://www.powerlineblog.com/archives/2019/03/taxation-or-confiscation.php
The link quoted Ludwig von Mises, Socialism, Part V, Chapter II (The Methods of Destructionism), Section 7 (Taxation), 1951.
[xvi] Perry, Oliver, Is Capitalism Immoral?, Illinois Family Institute, November 30, 2018, https://illinoisfamily.org/faith/is-capitalism-immoral/
[xix] Riddle, J. H., The Supreme Court’s Theory of a Direct Tax, Michigan Law Review, Vol. 15, No. 7 (May, 1917), pp. 566-578, https://www.jstor.org/stable/pdf/1275429.pdf
[xxi] Johnsen, Dawn, and Dellinger, Walter, The Constitutionality of a National Wealth Tax, Indiana Law Journal, Volume 93, Issue 1, Article 8, Page 111, https://www.repository.law.indiana.edu/cgi/viewcontent.cgi?article=11279&context=ilj
For an opposing view see:
Jensen, Erik, Taxation and the Constitution: How to Read the Direct-Tax Clauses, Scholarly Commons Faculty Publications School of Law Case-Western Reserve University 2006, https://scholarlycommons.law.case.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=1526&context=faculty_publications
[xxii] Leef, George, How The Ruinous “Living Constitution” Idea Took Root, Forbes, July 15, 2014, https://www.forbes.com/sites/georgeleef/2014/07/15/how-the-ruinous-living-constitution-idea-took-root/#10804cb46784
[xxiv] Sunstein, Cass, Cash and Citizenship (a review of The Stakeholder Society by Bruce Ackerman and Anne Alstott), The New Republic, May 23, 1999, https://newrepublic.com/article/62855/cash-and-citizenship
[xxv] Perry, Oliver, To Know Socialism is to Hate It, Illinois Family Institute, February 13, 2019, https://illinoisfamily.org/uncategorized/to-know-socialism-is-to-hate-it/
[xxvi] Perry, Oliver, Is Capitalism Immoral?, Illinois Family Institute, November 30, 2018, https://illinoisfamily.org/faith/is-capitalism-immoral/