Even if the people were on board at a gut level, the real facts and results of implementing a wealth tax would be instantly unpopular. Warren says the tax only applies to wealth above $50 million. No problem for most of us. But it leads to an obvious question: How does the Internal Revenue Service know who owns $50 million worth of property? The answer: they don’t.
They don’t right now, anyway. As Greg Rosalsky noted on NPR earlier this year, the tax “covers all forms of wealth — cash, stocks, diamonds, horses, super yachts — basically everything. Sen. Warren’s proposal would impose a 2% annual tax on every bit of a person’s net worth over $50 million and also an extra 1% tax on billionaires.” That means the IRS must either have knowledge of every American’s exact wealth or else must leave it up to wealthy people to self-report when they pass that $50 million threshold.
We know which option the IRS would choose. It already knows most of your income-type transactions. Not telling the IRS about a certain W-2 or 1099 doesn’t mean you will avoid paying taxes on it. The agency already has a copy of those forms, along with various others.
The same would eventually be true with a wealth tax. You might pay sales taxes when you buy something, but beyond that, the product’s value and whether you continue to own it are none of the government’s business. That’s a consequence of the way the government has taxed since the Sixteenth Amendment: Transfers, not ownership, are what matter.
Warren’s IRS would demand an annual accounting of people’s wealth.