Finally, a wealth tax may be legally very difficult to implement in the U.S. The Constitution forbids so-called direct taxation of property by the federal government (note that property taxes aren’t federal), except for certain rare exceptions. So Warren’s plan might require a constitutional amendment.
If these difficulties prove insurmountable, Warren and other egalitarian tax crusaders might consider an alternative — an inheritance tax, which would close many of the loopholes that now riddle the U.S. estate tax. Taxing all income from inheritances — including trusts, foundations, gifts, estates, and any other kind of family transfers — at a very high rate would yield a result similar to a small annual wealth tax, only its constitutionality would be less in doubt. And it would focus the tax on the rich people whose fortunes Americans are most likely to think of as being undeserved.
But whether it’s Warren’s plan or an alternative, a wealth tax seems like good idea for the modern U.S. One way or another, it seems like higher taxes are coming, and this tax seems better than most.
Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.