Federal Wealth Tax Proposals and the Constitutional Impact of Moore v. United States
The debate over the constitutionality and feasibility of a federal wealth tax in the United States has been deeply shaped by the Supreme Court's ruling in Moore v. United States (602 U.S. ___, decided June 20, 2024) and the subsequent introduction of the landmark Sanders-Khanna Billionaire Wealth Tax bill in early 2026.
The Sanders-Khanna Billionaire Wealth Tax Bill (March 2026)
On March 2, 2026, Senator Bernie Sanders (I-VT) and Representative Ro Khanna (D-CA) introduced a joint bill proposing a federal 5% annual wealth tax on individuals with a net worth exceeding $1 billion.
According to Sanders' office, the proposal features the following parameters:
- Revenue Projection: Proponents estimate the tax would raise $4.4 trillion over ten years, targeting only the wealthiest Americans (billionaires) while exempting anyone with a net worth under $1 billion.
- Wealthy Liabilities: Under the bill's provisions, specific ultra-wealthy individuals would face unprecedented personal tax liabilities: Elon Musk would owe approximately $42 billion, Jeff Bezos would owe $11 billion, and Mark Zuckerberg would owe $11 billion.
- Designated Spending: The projected $4.4 trillion windfall is earmarked for progressive social programs, including:
- A $3,000 direct payment to every man, woman, and child living in a household earning $150,000 or less.
- Reversing legislative cuts to Medicaid and expanding Medicare to cover dental, vision, and hearing services.
- Capping childcare costs at 7% of family income and establishing a $60,000 national floor for teacher salaries.
- Political Backlash: The bill has caused a massive political firestorm, particularly for Rep. Ro Khanna, whose Silicon Valley tech donors have threatened to withdraw their support over his endorsement of both this federal bill and California's Proposition 40 wealth tax initiative.
The Constitutional Hurdle: Direct Taxation and Apportionment
Any federal wealth tax faces a formidable constitutional obstacle under Article I, Section 9, Clause 4 of the U.S. Constitution, which requires that any "direct tax" must be apportioned among the states according to their population. Because wealth is highly concentrated in a few states (such as California and New York), a wealth tax cannot be practically apportioned by population, meaning that if it is deemed a "direct tax," it is unconstitutional.
To bypass this apportionment requirement, a wealth tax would need to qualify as an "income tax" under the Sixteenth Amendment, which exempts income taxes from apportionment. However, this raises the fundamental legal question of whether "income" requires realization (the sale or exchange of an asset) or if Congress can tax the unrealized appreciation of asset stocks (wealth).
The Impact of Moore v. United States (June 2024)
In Moore v. United States, the Supreme Court considered a challenge to the 2017 Mandatory Repatriation Tax (MRT), which taxed U.S. shareholders on their share of a foreign corporation's accumulated, undistributed earnings. The plaintiffs argued the tax was unconstitutional under the Sixteenth Amendment because it taxed unrealized income.
The Supreme Court ruled 7-2 to uphold the tax, but did so on highly narrow grounds:
- Attribution of Realized Income: The majority opinion, written by Justice Brett Kavanaugh, held that Congress has the power to attribute realized but undistributed corporate income to individual shareholders and tax them.
- No Ruling on Unrealized Wealth: The Court explicitly declined to address whether a tax on completely unrealized asset appreciation (such as a wealth tax) would be constitutional. Kavanaugh wrote that the Court's holding did not decide "the constitutionality of a congressional tax on appreciation of property or net worth."
- The Realization Divide: Despite the narrow majority ruling, concurring and dissenting opinions revealed a deeply divided Court on the issue of realization:
- The Concurrence: Justice Amy Coney Barrett (joined by Justice Samuel Alito) emphasized that the Sixteenth Amendment requires realization of income, suggesting that a wealth tax on unrealized assets remains unconstitutional.
- The Dissent: Justices Clarence Thomas and Neil Gorsuch argued forcefully that realization is a constitutional requirement for "income" under the Sixteenth Amendment, directly signaling that a federal wealth tax would be struck down.
Consequently, while Moore preserved existing international and corporate tax frameworks, it did not clear a path for a federal wealth tax. Instead, the opinions strongly suggest that a conservative-majority Supreme Court would strike down any annual wealth tax—such as the Sanders-Khanna proposal—as an unconstitutional, unapportioned direct tax.