Other People’s Money

Bernie Sanders and Elizabeth Warren, prospective members of a Biden Administration, yearn to usher a wealth tax into America. Most European countries that tried this abandoned the wealth tax as an abysmal failure. 

France had a wealth tax. Included in government valuation were cash, home, car, jewelry, bank accounts, brokerage accounts, retirement accounts, horses, jets, boats, art, family farms, gold, and anything you owned.  The wealth tax rate started at 0.5% for assets totaling 800,000 Euros and went up. French actor Gerard Depardieu had a successful career that brought him fame and fortune. Gerard Depardieu left France and became a Russian citizen in 2014. The French Wealth Tax was repealed in 2017.

Parades of European business people and celebrities left their countries with billions in assets to avoid the wealth tax. Dozens of European countries repealed wealth taxes as a failed experiment. Norway, Spain, and Switzerland maintain it with broad exemptions. France estimates a loss of 35 billion euros in assets, when 70,000 millionaires fled the country. 

Senator Elizabeth Warren calls her wealth tax an “Ultra-Millionaire Tax,” claiming it would raise $2.75 trillion over ten years. Senator Bernie Sanders takes on billionaires with a wealth tax on the top 0.1% of Americans. His plan would cut the wealth of billionaires in half over 15 years, if they stayed in America. Both are convinced that the United States has more income and wealth inequality than other countries, and wealth tax is a solution to equality. America's founders wanted equality of opportunity. Sanders and Warren seek equality of outcome. 

A wealth tax is a unique tax that requires an entirely different and separate tax structure from current taxes. Capital gains tax, payroll tax, estate tax, and consumption tax each generate government revenue. Income tax has been the main source of federal government revenue since the 1940s. 

Under current law capital gains are taxed when the gain is realized, when the asset is sold. When assets appreciate, but not sold, unrealized capital gains are not taxed. With wealth tax, the unrealized gains would be taxable. This presents a complex accounting valuation that would be controlled by the government. The Treasury Department would set rates of appreciation for assets.

Waving the class warfare flag, leftists claim these tax hikes will end inequality and pay for social programs. If adopted, a wealth tax will end up in catastrophe like everywhere else it has been tried. Assets from work, savings, and investment are already taxed at least once as individual or corporate income and perhaps again as a capital gain. 

Ignored in wealth tax schemes is the exodus of wealth. France is a small country - 70,000 French millionaires have fled to tax havens. Wealth flight impacts job creation, employment, taxes not paid by unemployed because employers left, charitable donations, and many aspects of society. George Clooney owns a mansion on Lake Como, Italy. Sean Connery, Julia Roberts, Richard Gere, Tom Hanks, and Bruce Willis - to name just a few - also have homes in tax haven countries.

Wealth tax proponents swear it will impact only the super-rich. This is like the camel’s nose under the tent; soon the whole camel is in the tent. The net worth figure for charging wealth tax will be lowered and lowered again; until everyone with assets will be taxed to give benefits to those with no assets. Eventually taxing other people’s money will become taxing your money.

Controversy regarding the constitutionality of wealth tax abounds. Constitutional scholars assert that a wealth tax does not represent a direct tax, and would therefore require a constitutional amendment before it could be enacted. The 16th Amendment allowed income tax in 1913, which was to be temporary to support the WWI war effort. Income tax is temporary like wealth tax will only impact the super-rich. Biden and Sanders claim wealth tax is allowed without a Constitutional amendment. This dispute could end up in the Supreme Court.

Experts predict that within 15 years the super-rich would lose one-half of their assets to a wealth tax. Prominent leftists like Barbara Streisand, Whoopi Goldberg, Roseann Barr, Cher, and others promised to leave the country if Donald Trump was elected. They are still here. If Joe Biden is elected and a wealth tax enacted, they may be part of the wealth flight and finally keep their word about leaving the country. What Karma!