Philip Hamburger explains why California’s proposed wealth tax strays from constitutional boundaries.
California’s proposed billionaire tax is unconstitutional. The ballot initiative calling for one-time retroactive 5% tax on the net worth of the state’s billionaires has prompted much unease, but the legal arguments against it have remained elusive. It’s therefore important to recognize that this tax is an uncompensated taking or at least a deprivation of property without due process, contrary to the Fifth and 14th amendments.
Disgruntled taxpayers often grouse that taxation is state-sanctioned theft, and libertarians frequently complain about regulatory takings. But the billionaire tax is a problem for more basic reasons—reasons that are crucial for all of us, not only the hyperwealthy.
Although taxes are generally lawful, that isn’t true of everything called a tax. Consider a hypothetical Bill Gates Tax (imagined by legal scholars Calvin Massey and Eric Kades) that imposes an income tax of 100% on Mr. Gates and no one else. In form, it’s a tax; in reality, it’s a confiscation.
The example of the Bill Gates Tax is extreme in demanding 100% of income from one person. It’s less extreme, however, than the California tax in taking only income, not wealth, and in being prospective. …
… Taxes are furthest from takings when they’re prospective, recurring and equal in their burdens—or, if not equal, then sufficiently graduated to distribute their burdens widely and proportionately. The proposed California tax is a retrospective one-time measure targeting only billionaires, making it an uncompensated taking or at least a deprivation of property without due process of law. …
… Taxes can be targeted without being unconstitutional. They can take aim at particular events, goods and materials, and exceptions can excuse particular companies. California’s tax, however, targets a small class of individuals, billionaires, and doesn’t burden anyone else, even for small amounts. This is distinctive and worrisome—particularly when imposing massive payments.
