Tuesday, August 31, 2010

Wealth Tax

By Mike Dorf

The recent Jane Mayer expose on the billionaire Koch brothers has been understandably garnering considerable attention. Mayer documents the extent to which said brothers have been bankrolling the Tea Party movement to advance both their economic libertarian ideology and  their business interests.  The article is a useful antidote to the view that the only serious threat to democracy from concentrated wealth derives from corporations.  That view, fostered by the Citizens United case, misapprehends the real problem: concentrated wealth itself.  Corporations are merely one vehicle for aggregating enormous wealth.

Thus, anyone concerned about our political economy ought to be no less concerned about giant pools of money in the hands of natural persons than in the hands of corporations.  Indeed, the former is arguably a greater threat; diffuse corporate ownership makes it less likely that corporate treasury funds will be used to fund an idiosyncratic political agenda than will the funds of an individual.

Here I'd like to suggest a politically infeasible response, mostly to explore what constitutional reaction it would trigger.  The response I have in mind is a wealth tax, the goal of which would be to reduce individual fortunes. The core idea would be to forbid fortunes from growing so large as to permit anyone to use that fortune to rig the political system in his or her interests.  I'm not sure what the largest permissible fortune ought to be, atlhough something on the order of $10-20 million strikes me as plenty high enough.

Now a few thoughts:

1) Yes, I get that this is a non-starter politically.  But at the same time, if the right is going to label even tepid regulatory measures as "socialist," there's really no political harm in enacting actual socialist programs.

2) A wealth tax of the sort described would make the NBA salary cap unnecessary.  Let's go Knicks!

3) A federal wealth tax could well be unconstitutional as a "direct tax" that is not apportioned by state, although it is not clear whether current Supreme Court doctrine is as restrictive of such direct taxes as the old jurisprudence per Pollock v. Farmers' Loan & Trust Co..

4) Even assuming a federal  wealth tax would not run afoul of the apportionment requirement, I worry that the Court that gave us Citizens United might strike it down as a violation of the First Amendment.  After all, a law that does not facially discriminate on the basis of content or speaker can nonetheless be invalidated as content-based or speaker-based if it is motivated by content-based or speaker-based concerns.  More broadly, I worry that in the future, other facially content-neutral and speaker-neutral measures adopted for the purpose of curbing the distorting influence of money on politics could be struck down on the grounds that they discriminate against the views of the rich.  I would hope to be proven wrong, but one never knows.

5) Perhaps the strongest policy argument against a federal wealth tax is that it would drive capital to other countries.  Assuming we could get solid information on overseas accounts, super-rich Americans seeking to avoid payment of the wealth tax could still do so simply by becoming citizens of countries that do not have a wealth tax or, for that matter, an income tax, rubbing elbows with tennis greats on the streets of Monte Carlo.  But even that would have an upside, as the First Amendment may tolerate greater limits on the political speech of foreigners than of U.S. citizens.