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Law professors debate the constitutionality of a wealth tax

Key issue appears to be interpretation of 1895 Supreme Court case

Two law professors recently disagreed about the constitutionality of a wealth tax during a panel hosted by The Federalist Society on April 16.

George Washington University Law Professor Jonathan Turley argued that he does not believe that the wealth tax is Constitutional while Professor David Gamage of Indiana University said he believes the wealth tax is constitutional. Gamage argued that a tax on net assets would be Constitutional if viewed as an excise tax.

“Proposals for wealth taxes have exploded in prominence,” Gamage said in his opening remarks.

He said it started with Senator Elizabeth Warren’s wealth tax proposal during her 2020 presidential campaign. Gamage advised Warren’s campaign on wealth taxes and has advised lawmakers on the issue at the federal and state level.

“Excise taxes are listed in the federal Constitution, along with duties, imposts, and indirect taxes,” Gamage said, “as specific forms of taxation that can be assessed on a uniform basis rather than direct taxes which must be apportioned.” Direct taxes have to be “the same amount in every state” according to the Constitution Center.

Gamage compared to the wealth tax to the corporate, estate and gift taxes, which have all been ruled Constitutional by the Supreme Court. “I think the most natural application of prior Supreme Court doctrine,” Gamage said, “is to hold that a structure like the Warren wealth tax” Constitutional.

This is because the tax “only is triggered by the activity of accumulating and maintaining extreme levels of wealth and is not a tax on the wealth itself, should be an excise tax and can be uniform.”

Both professors relied on interpretations of a 1895 Supreme Court case on the constitutionality of taxes. Pollock v. Farmers’ Loan and Trust led to the 16th Amendment.

Professor Turley disagreed with Gamage’s arguments that the judicial record is clear on the Constitutionality of taxes. “I think the text of the Constitution really strongly favors the idea that this is a direct tax,” Turley said. “And if it is a direct tax, then it triggers the requirement of direct taxes.”

The George Washington University professor argued that Congress “passed a federal income tax amendment, but it did not allow for this type of wealth tax.”

“So as a matter of constitutional interpretation, my natural default is to say this is a direct tax,” Turley said. “It would be unconstitutional in its current form.”

Turley said that Professor Gamage “is right that there is language and there are cases that support advocates for the wealth tax” but he “ find[s] those cases largely unconvincing.”

He disagreed with Gamage’s language that said that the tax would not be on wealth, but on the activity of growing wealth.

“One of the things that concerns me about those cases and what also concerns me about David’s view of excise taxes is that it’s sort of a magic bullet solution,” Turley said. “You just call everything an excise tax. In this case, you’re being taxed for the, to use David’s words, for the activity of being really wealthy.”

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Angelique Clark -- University of Nevada, Las Vegas