We have been following the progress of the proposed tax on the wealth of billionaires that theatens to make its way onto the ballot in Callifornia this November. It represents a bald form of “the danger of democratic theft” that John and I discussed in our 2005 essay on the income tax:
Given that poorer citizens always outnumber the rich, political philosophers have long worried that government based on majority rule could lead to organized theft from the wealthy by the democratic masses. “If the majority distributes among itself the things of a minority, it is evident that it will destroy the city,” warns Aristotle. Taxation can become a way for one group to prey upon another. We must guard against a majority helping itself to the wealth of a minority.
The Founders of the United States were deep students of politics and history, and they shared Aristotle’s worry. Up through their time, history had shown all known democracies to be “incompatible with personal security or the rights of property.” James Madison and others therefore made it a “first object of government” to protect personal property from unjust confiscation. Numerous provisions were included in our Constitution and Bill of Rights to protect the property rights of citizens.
Given that one of the causes of the American Revolution was a tax, the Founders understood very well that taxation could become a way for one group to prey on another. So while the Constitution empowered the federal government to levy taxes, it limited this power mostly to indirect taxes like tariffs, duties, and excise taxes. For much of American history the federal government subsisted solely on those fees.
The Constitution did grant the federal government the power to levy “direct” taxes on a “per head” basis, but required that all money raised this way must be given to the states according to their population. The aim here was to preserve a decentralized federal system of rule, and to make it “difficult to place a direct tax on capital, the most destructive tax in terms of economic growth and economic initiative,” according to Professor Edward Erler.
We have been following the progress of the proposed California wealth tax mostly through the reporting of Pirate Wires. In its latest installment, Pirate Wires has just posted Riley Nork’s report: “I Went Undercover As a ‘Signature Collector’ for California’s Wealth Tax” (“an exercise in investigative journalism™, volunteer activism, and getting ghosted outside trader joe’s”). It contributes to this ongoing case study in the danger that the Founders feared.
