The administrative burdens of a wealth tax would be significant. Richard Epstein writes:
The wealth of the superrich includes not only publicly trade stocks and bonds that have precise market values, but also working assets such as interests in start-ups that are not traded at all. Those business interests are typically not alienable, and their valuation can fluctuate extensively over time. Banks are reluctant to lend against assets in new ventures that have a high chance of going bust. Similar valuation problems frequently arise for people who have complex interests in legal, medical, or banking practices; their wealth, too, is not in readily taxable form. Accordingly, income tax law has made the sensible decision never to tax annually the increment (or decrement) in value of these interests. Instead, that income is taxed only when it is converted into cash or marketable assets. [...]
One of the reasons why I am firmly opposed to any estate tax is that it cannot duck these valuation problems. When someone dies, it becomes necessary to attach a value to all property that passes at the time of death. At this point, the valuation problem is acute for all different asset classes. [...] [I]t is necessary to untangle a web of unique financial assets—interests in partnerships and closed corporations, patents, royalties, options, leases, mortgages, and more, from which must be offset the full range of immediate and contingent liabilities. The entire process often takes years to resolve, given the high level of valuation uncertainty.
But at least the administrative costs are worth incurring, because estate tax rates quickly zoom up to 40 percent on the taxable estate. It is sheer madness, on the other hand, to incur these costs to collect 2 percent of a total, as Warren's wealth tax would do. The administrative costs of imposing a 2 percent wealth tax on persons whose net worth is, say, $55 million would surely surpass the $100,000 the tax would generate. Yet just imagine how much it will cost the IRS to process the 75,000 returns that Saez and Zucman predict will be filed annually. Unfortunately, the government will have to cast its net even wider to determine which households have assets exceed that Warren's $50 million exemption. [...] It is a senseless use of government resources to require our ablest citizens to take valuable time supplying documents and undergoing audits and grueling examinations that carry with them the risk of civil and criminal sanctions.
[Richard A. Epstein, "The Toxic Warren Wealth Tax," Defining Ideas, February 11]
Freeloaders? Chris Edwards, using IRS Data on the top 400 taxpayers in the nation, examines Sen. Elizabeth Warren's claim that billionaires are freeloaders who don't pay their fair share:
The Top 400 paid $29.4 billion in federal income taxes in 2014, an average of $74 million each. These "freeloaders" together paid enough to more than fund the budgets of NASA and the EPA that year ($26 billion).
The Top 400 paid 2.13 percent of all federal income taxes in 2014. That share has trended upwards over time, as shown in the chart. Indeed, the Top 400 share of taxes has doubled from 1.04 percent in 1992, which is the first year of IRS data.
This top group is just 0.0003 percent of all taxpayers yet paid 2.13 percent of all income taxes.
[Chris Edwards, "Taxes on Tippy Tippy Top," Cato Institute February 12]
High tax rates discourage young people from investing in themselves. Veronique de Rugy and Jack Salmon write:
Changes in marginal tax rates not only lead to changes in federal revenues, but also have a broader effect on human capital accumulation and labor market efficiency. Aparna Mathur, Sita Slavov, and Michael Strain have explained that in the long term, a more progressive tax system reduces the incentives to accumulate human capital:
"Earlier decisions such as education and career choices affect later earnings opportunities. It is conceivable that a more progressive tax system could reduce incentives to accumulate human capital in the first place. At 70% tax rates, a high school student may choose not to pursue his dream of becoming an engineer, or a small business owner may choose not to expand their business."
To put it another way, proposals to impose high marginal tax rates do not account for the incentive to enter high-earning occupations. Making career choices includes weighing the expected return of educational investments and the cost of forgoing alternative opportunities. A 70 percent marginal tax rate would, therefore, act as a disincentive for people to pursue high-earning occupations. Michael Strain notes that "a young person interested in health care might decide to become a nurse rather than a surgeon, because much of the income gained from being a surgeon will be taken by the government. . . . In this case, our hypothetical young person isn't deciding to be a nurse because that's her preference—instead, she's making the decision because the top rate is so high." There is no doubt that this sort of tax-driven inefficiency makes society worse off.
[Veronique de Rugy and Jack Salmon "The Cost of a 70 Percent Marginal Tax Rate," Mercatus Center, February 11]
The national debt is now $22 trillion. Justin Bogie writes:
At more than 107 percent of gross domestic product, as a share of the economy the gross national debt is higher than it has been since 1947. The debt has been higher only three times in U.S. history, all in the immediate aftermath of World War II.
If the national debt were divided among every person in the U.S., each of us would owe more than $67,000.
Although those numbers are staggering, they are projected to get worse.
The CBO's latest budget and economic projections estimate that over the next decade the country will add another $12.2 trillion in debt. That's almost $30,000 in new debt per person on top of the $67,000 already owed.
[Justin Bogie, "Our National Debt Just Hit $22 Trillion. Will Congress Finally Take It Seriously?" The Daily Signal, February 13]
An opportunity to rein in the administrative state: George Will writes:
The U.S. Court of International Trade, which sits in New York, is mulling the argument, made on behalf of American steel importers and foreign steel producers, that the discretion that presidents enjoy under Section 232 is so vast that it amounts to unconstrained lawmaking. Hence it is an unconstitutional delegation of legislative power. The Trump administration not only makes the dubious assertion that imports have imperiled vital domestic metals manufacturers, it breezily says national security depends on a vibrant economy that is imperiled by imports. How the administration squares its fears about the dangerous fragility of the U.S. economy with the president's boasting about the economy's awesome strength is another puzzle.
During oral argument in December, one judge on the three-member panel asked a lawyer defending the administration's position if there is any product that the president does not have the congressionally conferred power to restrict imports on national security grounds: "Could he, say, put a tariff on peanut butter?" The judge got a foggily evasive answer.
Gary Lawson of Boston University School of Law has argued that the Constitution's structure and a "background" or "embedded" principle permit Congress to delegate to presidents discretion regarding matters "ancillary" to a statute but not regarding "fundamental matters." He says that the Constitution's Framers were not redundant when they said Congress could make laws "necessary and proper" for the exercise of an enumerated power (e.g., "to regulate commerce with foreign nations"). The two words have independent meaning: A "proper" law is not only necessary but consistent with, among other things, the separation of powers. Larry Alexander of the University of San Diego School of Law and Saikrishna Prakash of the University of Virginia School of Law have argued that a law cannot properly give to the president discretion to "make rules for the governance of society," which is legislating.
[George Will, "Limited Government Requires a Limited President," National Review, February 10]
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