A wealth tax in the USA: political and legal proposals and disputes about its constitutionality

Abstract

This article examines major proposals and the constitutionality of a federal wealth tax in the USA. Drawing on historical and comparative research, the author analyzes relevant American political and legal writing on the subject and traces, among other things, numerous opinions on the ‘direct tax’ clauses in the U.S. Constitution, in particular those of the Founding Fathers and the U.S. Supreme Court justices. Calls for a wealth tax, especially a comprehensive federal wealth tax, namely on an entity’s net worth above a certain threshold, are relatively new to the United States. Over the last twenty-five years, however, discussions about such a tax have gained momentum. Historical evidence suggests that this is due to an increase in income and wealth inequalities that has accelerated significantly since the 1980s. As a means to address these inequalities, a wealth tax has gained popularity in academia and among politicians from both ends of the political spectrum. Its supporters point out that excessive wealth concentration is harmful both from a political and an economic point of view. Nevertheless, a wealth tax raises doubts in many respects and would necessarily draw review ultimately by the Supreme Court as to whether a federal wealth tax falls within the scope of the ‘direct tax’ clauses of the U.S. Constitution. A further complication is whether a wealth tax may be subject to ‘apportionment’ among the states based on population, making the adoption of a federal wealth tax difficult, if not impossible to implement.