Paul L. Caron

Wednesday, March 2, 2016

McCaffery:  Taxing Wealth Seriously

Edward J. McCaffery (USC), Taxing Wealth Seriously:

The social and political problems of wealth inequality in America are severe and getting worse. A surprise is that the U.S. tax system, as is, is a significant cause of these problems, not a cure for them. The tax-law doctrines that allow those who already have financial wealth to live, luxuriously and tax-free, or to pass on their wealth tax-free to heirs, are simple. The applicable legal doctrines have been in place for nearly a century under the income tax, the primary social tool for addressing matters of economic inequality. The analytic pathways to reform are easy to see once the law is properly understood. Yet our political systems show no serious interest in taxing wealth seriously. We are letting capital off the hook, and ratcheting up taxes on labor, at precisely a time when deep-seated and long-running economic forces suggest that this is precisely the wrong thing to do. It is time -- past time -- for a change. This Article canvasses a century of tax policy in the United States to show that we have never been serious about taxing wealth seriously, and to lay out pathways towards reform.

Scholarship, Tax | Permalink


Favoritism is the only use of power.

Posted by: theyhaveten | Mar 3, 2016 9:03:05 AM

I found it surprising that McCaffery didn't mention the obvious problem with a wealth tax -- it would be a direct tax that would have to be apportioned among the states by population. Absent a constitutional amendment, this would have the grossly unfair result of different tax rates from state to state.

Posted by: guy helvering | Mar 3, 2016 8:35:23 AM

@capinstax At over $600 billion, the US already spends more on its military than the next 7 countries combined. We spend, for example, almost 3 times more than the Chinese. Plus, our spending to GDP ratio is over 1% higher than China. Wiki is your friend.

I don't think we need to spend anymore. In fact, we need to cut all federal spending by at least a third or more.

Posted by: Dale Spradling | Mar 3, 2016 6:01:30 AM

"The analytic pathways to reform are easy to see once the law is properly understood. "

Time to open the reeducation camps!

Posted by: ruralcounsel | Mar 3, 2016 5:51:13 AM

Can't have a wealth tax without justification. Here is the justification:

Posted by: capinstax | Mar 3, 2016 1:23:28 AM

@Dale, and when they finish looking into the Fed-Wall Street connection they may want to look at how Progressive land use regulations have done the same for real estate wealth inequality in all the chic locales fans of wealth taxing live.

Posted by: MG | Mar 2, 2016 11:54:20 AM

Exceptionally difficult to take this article seriously.

Posted by: Walter the Tax Nerd | Mar 2, 2016 9:05:11 AM

Passing wealth on to heirs tax-free? Not if it exceeds the estate tax exemption. Passing to a self-aggrandizing charitable foundation? Sure.

Posted by: AMT buff | Mar 2, 2016 7:46:17 AM


Taxing income is not enough. We also need to confiscate wealth?

I would also suggest Mr. McCaffery you confer with your economic colleagues at USC to discover how the Fed has transferred trillions from main street to Wall Street. You might get a better insight as to the cause of inequality.

Posted by: Dale Spradling | Mar 2, 2016 5:40:03 AM