A Wealth Tax Would Hurt the Economy

Monday, 31 Dec 2012 02:41 PM

By Armstrong Williams

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Democrats always seem to be in search of new ways to get revenue, especially from the rich. One idea being floated around recently which a few European countries have is a tax on wealth, or assets.
 
According to Daniel Altman in The New York Times, “the real menace for our long-term prosperity is not income inequality — it’s wealth inequality.” This is the great distortion to economic prosperity, he argues.
 
It sounds good, and I am sure when people think of it, they imagine an NBA superstar or Bill Gates looking at his balance sheet and paying fees on certain items, like houses, cars, and  yachts, without objection because they are so wealthy.
 
Beneath the surface, however, it is more legally more complex, and could be counterproductive.
 
First off, the Constitution would complicate its implementation. Within Article One it says, “Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers.”
 
Along with “No capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.” The 16th Amendment (1913) also says, “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”
 
The wealth tax would be considered a direct tax, because it is based off of the property or assets and individual owns. The tax would have to be “apportioned among the several States,” which means it would be based off of the census of a given area.
 
This also means that government must a goal or target or revenue, so there would have to be large regulations enacted so that the government has an idea of how much revenue it is going to take.
 
States with small populations like Rhode Island and Montana would have to be a portion of the overall tax, but the money taken from them would devastate them compared with California or New York.
 
Even though California is a financial mess, many wealthy people still live there. So based off their population, they would be taking less of a hit then a smaller state. The dynamics of the states in terms of wealth, population, and demographics are not taken into account. The Constitution wouldn’t allow for this because it’s a direct tax.  
 
Wealth inequality over the last 30 years and subsequent stagnant wages is a good debate to have. But a wealth tax will exacerbate the problem, not help it, because wealthy people will just move their assets. Those potential yachts and Ferraris will be moved to a different state or off our shores.
 
Wealthy people have the lawyers and accountants to get around the taxes. John Kerry avoided a steep yacht tax in Massachusetts by docking his boat in Rhode Island! Many professional golfers used to live in California, but as the purses got larger on the professional circuit they moved to Florida where there is no income tax. 
 
Many businesses and wealthy individuals are leaving California in droves. The state's taxes are so high that a state like Texas or Virginia might be a better fit. Donald Trump has said he has considered leaving New York recently for Florida, or another business-friendly state.
 
Rich people will always find ways around the taxes so the government won’t get the revenue it’s projected for itself in the first place. A wealth tax wouldn’t solve the problem of getting more revenue from the wealthy; it would get less, and hurt their economy.
 
Governor O‘Malley in Maryland put in a millionaires tax a few years ago, and they got less revenue. The rich people moved, and found loopholes. We need to encourage economic freedom so this wealth can spread around, not by force of government, but by the free market, and the natural human instinct to better his situation.
 
Wealth at the top is a good thing. It means our nation is doing something right, in that it is letting entrepreneurs have the freedom to take risk and create good-paying jobs for the rest of us.
 
Every year The Heritage Foundation releases a list of rankings of the most economically free countries in the entire world. Hong Kong, Singapore, and Australia are the first three, while Canada is sixth, Ireland is ninth, and the United States ranks 10th. The bottom of the list has countries like Zimbabwe, Angola, North Korea, and Cuba. Which countries would you rather live in? Things like the wealth tax are dropping the United States on the list.
 
This is not the old days when a rich person in New York could just move to Florida. We are dealing with an entirely global economy at this point, and these wealthy people will move out permanently. They will go where the taxes are the lowest, and the regulations are less intrusive.
 
Armstrong Williams is an African-American political commentator who writes a conservative newspaper column, hosts a nationally syndicated TV program called “The Right Side,” and hosts a daily radio show on Sirius/XM Power 128 (7-8 p.m. and 4-5 a.m.) Monday through Friday. Read more reports from Armstrong Williams — Click Here Now.
 
 

 
 
 

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