The simple act of dehumanizing someone or someone has given permission to some of the darkest instincts in politics. When you forget they’re someone’s son or daughter, parent or spouse, it’s surprisingly easy to lash out at a political opponent. If you want to dismiss a candidacy, you can portray its supporters as ignorant fools who, in the words of one candidate, cling to guns and religion as a refuge from a modernizing world, or as nothing more than takers in the words of another. When the opposing party is treated as The Other, it demands no respect and makes it simple to persecute them for political gain. This exploitation has shaped so much of human history.
As Washington rushes toward impending deadlines and scrambles to solve a riddle over infrastructure spending, Democratic lawmakers appear to have discovered the latest incarnation of The Other. This time, it’s about 700 ultra-wealthy Americans and the assets that increase in value year after year, making their generosity even more obscene.
Americans have long been fascinated by and despised this class of billionaires. From Daddy Warbucks to Donald Trump, the mystery of vast wealth has piqued the public’s interest. They’re a cut above, a group of people who have risen to the top of their professions and others who were born into it.
Anyone worth $1 billion or more would face a one-time tax on their wealth under Wyden’s proposal. For example, if someone invested $1 billion in stocks and those shares are now worth $5 billion, that person would be assessed as having made $4 billion and would be subject to a tax bill on those shares, even if they were never sold. The IRS would then send a tax bill for future gains on an annual basis. The increase in investment from $5 billion to $6 billion would result in $1 billion in income.
However, there is one significant issue here: it may be illegal. Even after the Sixteenth Amendment overturned an 1895 case that declared income taxes unconstitutional, the Constitution has a fairly narrow tolerance for taxes. For starters, wealth is not the same as income. When something increases in value but isn’t sold, it theoretically increases an individual’s purchasing power.
Of course, the super-rich have found ways to use their theoretical wealth to fund their lifestyles in practice. They can put their money in a growing account and then borrow against it to cover day-to-day expenses like private jets and islands. It’s how PayPal co-founder Peter Thiel has a rumored $5 billion Roth IRA. In this case, the latent asset could be considered taxable. And that’s what Democrats are banking on, if you’ll excuse the pun.
To be clear, billionaires are not a victim class. They are, however, an easy target for Democrats’ ambitious—and as of yet amorphous—plans for a new social safety net. Billionaires already pay a much lower proportion of their wealth in taxes than the rest of us. Governments receive approximately 7% of the bottom 99 percent of Americans’ net worth. Less than half of that is sent to Uncle Sam by the top 0.1 percent.
However, at least in the current iteration of the plan, they are aiming for a specific class. In addition to the constitutionality of wealth taxation, the proposal raises a second constitutional question: Can a law legally target a specific person or group of people? The Constitution expressly prohibits passing laws that target a specific individual. In the absence of a trial, Congress, for example, cannot pass legislation declaring Citizen Z guilty of a crime. Courts have agreed that this is very British in its bill of attainder origins.
There is, however, a window in which the Supreme Court might allow Wyden’s plan, and it dates back to Congress passing a law during Watergate requiring the federal caretakers to seize Richard Nixon’s presidential papers so they could not be destroyed. In that case, the Supreme Court ruled that Nixon was not being punished and his compensation for the records negated any perceived penalty.