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Tax Law Review



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Wealth Tax, Capital Gains, Accrual-Income Tax, Excise Tax Canon, Excise, 16th Amendment, Apportionment


Our current income tax is unable to address growing concentrations of financial wealth and resulting economic inequality. But reforms to address these problems—such as a wealth tax or an income tax on unrealized capital gains—are stymied by fears of unconstitutionality. The basic claim is that wealth taxes and similar reforms are “direct taxes” under the Apportionment Clauses of the Constitution, and since apportionment is not feasible, these taxes are impossible. But this claim is wrong.

This Article shows that there is in fact a long history of federal taxes similar to wealth taxes—both apportioned and uniform—and a well-developed constitutional tax jurisprudence to go along with that history. This jurisprudence has laid mostly dormant during the past century-plus of the income tax era, but a reconsideration of taxation and the Constitution shows that we should now have multiple viable paths for taxing extreme concentrations of wealth.

In particular, we call for reviving a two paths approach to constitutional tax questions, which was dominant for most of the first century of United States history. Under this view, apportionment, like uniformity, is merely a method of taxation, not a barrier. We show for the first time in the literature how this method is practically viable today using modern fiscal instruments.

We also show for the first time in the literature that there is coherent and mostly consistent Supreme Court jurisprudence to guide the two paths approach, even including the much-reviled case of Pollock v. Farmers’ Loan & Trust Co. Central to this jurisprudence is what we call the Excise Tax Canon, a quasi-canon of constitutional interpretation under which prominent wealth tax and similar reforms should be upheld as excises that can follow the uniformity path.

Finally, because there is uncertainty about which path—apportionment or uniformity—the Supreme Court might require, we propose strategies for drafting a tax reform to navigate those uncertainties.

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