Wealth tax fails to generate revenue – enforcements are political infeasible and unconstitutional.

But proposals for a wealth tax face both economic and political objections. These start with mundane administrative problems, such as how to value a company that has not yet gone public or art that has been in the family for generations. Wealth-tax proponents suggest that taxpayers can be deterred from underreporting the value of such assets if the government is given the option of purchasing them at the reported price. However, it is hard to imagine the US government employing an army of fine art appraisers when the Internal Revenue Service is incapable even of retaining an adequate number of plainvanilla tax auditors., A related problem is taxpayer flight. Saez and Zucman suggest that this danger is exaggerated – that few people are likely to change their country of residence in response to an annual wealth levy of 2% or 3%. Warren notes further that the US taxes citizens on their global income regardless of where they reside, so that relocation is not an effective means of evasion. She proposes levying a 40% ‘exit tax’ on the assets of individuals worth more than $50 million who renounce their citizenship. Still, there are likely a variety of ways to evade taxation. Individuals modestly above the taxable threshold could divide their assets with their grown children sooner rather than later. They could donate to philanthropies that espouse their political values, bringing their wealth below taxable levels without diminishing their sway over public affairs. They could consume, since a dollar spent on consumption rather than invested is immediately free of this form of taxation. If nothing else, a wealth tax would be good for the luxury goods industry. These are all reasons for suspecting that a wealth tax is unlikely to yield $2.76 trillion of new revenue over ten years. And even if it does, this will go only a small way toward financing programs like universal health care, which Warren herself prices out at $20.5 trillion over a decade. Politically, the challenges are, if anything, even more daunting. Whether a federal wealth tax would be judged constitutional by the Supreme Court is uncertain. The question applies with even greater force to Warren’s proposed exit tax, which might be deemed to violate the ‘takings clause’ of the Fifth Amendment prohibiting the federal government from taking private property for public purposes without just compensation. A candidate on the left advancing a wealth tax would be attacked by the right for engaging in class warfare. A wealth tax may appeal to left-leaning progressive voters, but it is not clear that the apocryphal median voter is on board with the idea. Commentators swayed by these objections – but nonetheless concerned about wealth and income inequality – have suggested tightening existing income tax rules and enforcement rather than creating an entire new fiscal bureaucracy. Forms of income currently enjoying concessionary tax treatment, such as carried interest (funds paid to investment managers in excess of the amount that the manager contributes to the partnership), could be taxed as ordinary income – that is to say, at higher rates. Taxes on wealth could be raised at least modestly within the current framework by increasing estate tax rates and lowering the taxable threshold.