March 2, 2021 3.05pm EST

Sen. Elizabeth Warren says it’s time to tax wealth.

The Massachusetts senator on March 1 to tax households worth over US$50 million and up to $1 billion at a rate of 2%, and anything over that at 3%. She during the Democratic presidential primary in 2019.

The legislation, which over a decade, is meant to reduce inequality by using revenue from the wealthiest Americans to pay for new federal programs to lift up some of the poorest.

There’s at least one problem: It may be unconstitutional.

As an , I know firsthand how America’s system has exacerbated inequality. Fortunately, there are other ways to tax the rich.

Income and wealth inequality

Concerns about inequality have increased in recent decades.

Americans and broadly shared prosperity from the end of World War II into the 1970s.

But in the 1980s, – twice – cutting the top rate on wages from 70% to 28%.

Studies have shown that the drop in tax rates, combined with other “trickle-down” policies such as deregulation, .

The wealthiest 1% of all wealth in 2016, up from less than 30% in 1989. At the same time, the bottom 90% held less than a quarter of America’s wealth, compared with more than a third in 1989.

Currently, the federal government at 37% with on incomes over $250,000.

The problem with a wealth tax

奥补谤谤别苍’蝉 aims to change that.

Her tax on estates worth over $50 million , or fewer than 1 in 1,000, according to University of California, Berkeley economists Emmanuel Saez and Gabriel Zucman. The tax wouldn’t start until 2023.

Unlike an income tax, a wealth tax of both wealth and income inequality.

There’s only one snag: There are that a federal wealth tax is . Wealth taxes violate Article I, Section 2, Clause 3, of the U.S. Constitution, which forbids the federal government from laying “direct taxes” that aren’t .

A direct tax , like property or income. An indirect tax is a tax on a transaction: for example, a sale or a gift.

The income tax is a direct tax and constitutional , which specifically allows income taxes without apportionment. As for property, you may notice that . In almost every case, the federal government cannot tax real estate or any other form of wealth absent a transaction.

Warren of law professors who back her claim that a wealth tax passes constitutional muster. But the argument against constitutionality is strong enough that a lawsuit before the Supreme Court .

Barring a victory before a conservative Supreme Court or , the federal government is shut out of taxing wealth.

Two other proposals

Two other proposals to tax the rich also emerged in 2019.

Rep. Alexandria Ocasio-Cortez of New York a new “60% to 70%” tax bracket for income earned from labor over $10 million. She and raise $720 billion over 10 years.

One problem with that idea was that the wealthy by . A second is that the rich , which than wage income.

Vermont Sen. Bernie Sanders, who has , going after wealth but targeted instances when it’s being transferred to someone else – which is what makes it constitutional. He wanted to lower the threshold at which the estate tax applies from $11 million – which – to $3.5 million, where the threshold stood in 2009. He would also levy a new 77% rate on estates over $1 billion. Sanders estimated that his plan over 10 years.

Although this would bring in significantly less than his colleagues’ proposals, it is far superior because it both addresses the root of the problem – wealth disparities – and can be implemented immediately. And it wouldn’t pose a constitutional problem.

A rising tide

I agree with all three lawmakers that the United States should return to economic policies that .

Although American wealth and productivity has surged in the last 40 years, most Americans as the . In 2020 alone, , even as tens of millions or to get enough to eat.

The U.S. tax system is at least partly responsible for these gaps. A wealth transfer tax – rather than one that taxes wealth – seems to be the best approach to both pass legal muster and help solve the problem.

This is an updated version of an on April 2, 2019.