Friday, July 8, 2022
Sam Sturgis on the Wealth Tax
Samuel Sturgis, a 2022 graduate of MC Law, was recenty honored by the Tax Law Section of the Federal Bar Association for his excellent scholarship. Sam received second place in the Donald C. Alexander Tax Law Writing Competition for his paper, "The Wealth Tax--Egalitarian Dream or Utilitarian Nightmare?" A full version of the paper, which Sam is planning to develop for submission to law reviews, is available on the FBA website (here). Sam will enter the Graduate Tax Program at the University of Florida Levin College of Law this fall; they are very lucky to have him! Here is an abstract of his article:
In the Nottingham of literary folklore, the poor starved while the wicked feasted. To survive, ordinary people needed a savior, and they found it in Robin Hood. Taking from the rich feed the poor, the green-clad yeoman emboldened the hopeless and became a hero of the proletariat for centuries to come. Today, the poor face a similar plight—castles and kings have disappeared, but an uncrossable moat seems to be widening between the “haves” and the “have nots.” Ordinary working people need a hero. Instead of Robin Hood, many are beginning to howl for a new solution, one that would turn the tables on the wealthy and give them a taste of their own medicine. Their answer: tax the rich.
The urge is timeless. Landed gentry, titled aristocracy or silicon-valley elite, the rich have always occupied an enviable spot in society. But in a world that has recently ground to a halt under the pandemic, the divide between ordinary and elite has only grown. As interest rates and inflation rise and hard-working Americans watch their industries dwindle, America’s billionaire class is thriving. While Jeff Bezos and Elon Musk battle for the title of world’s richest man, normal Americans seem to inch daily towards a Nottingham reality.
As a result, many businessmen, economists, and policymakers and have come forward with a new solution: tax the assets of the ultra-wealthy. This so-called “wealth tax” would be a form of redistributive justice aimed at closing the wealth gap and putting money where it is most needed: in the hands of hard-working Americans. To do so, it would levy an annual tax on the standing wealth of the financial elite. But is this really a workable solution? At first blush, a tax on standing wealth sounds workable, even desirable. Surely the uber-wealthy can afford to lose a bit of their massive wealth; and think of all the wrongs that could be righted with the revenues such a tax would generate. Utopia, it might seem, is within grasp.
But these claims must be tested. If a wealth tax is to produce tangible good, it must be measured against a tangible standard. While the proponents of a wealth tax laud it as a modern-day Robin Hood, its detractors stand ready to point out that in the long run, the ends might not justify the means. To truly judge a policy as socially disruptive as a wealth tax, discernable standards must be applied to answer a simple question: is a wealth tax good?
This Article attempts to answer that question by applying Utilitarian moral framework to current wealth tax proposals. Armed with a historical understanding of the progressive U.S. tax system and an eye toward cumulative effects, it seeks to determine whether a wealth tax is morally defensible, both as an economic solution and a philosophical ideal.
Ultimately, the answer is clear: a tax on wealth, while attractive in theory, is ultimately not the best solution for a struggling society. A wealth tax might feel good; it might even succeed in sticking it to the rich. But at the end of the day, its costs outweigh its benefits. Its downstream effects, as well as its ideological underpinnings, are less effective and far more sinister than they appear. As the Article will show, enacting any of the current wealth tax proposals would be a bad choice—one with potentially devastating consequences. It would do more harm than good, and could leave the country looking a lot less like Robin Hood than Prince John.