Here’s the Neat Trick of Biden’s Billionaire Tax

President Biden is trying to pull off a neat trick with his so-called billionaire tax plan: to raise taxes on the wealthy without directly taxing wealth.

The 16th Amendment to the U.S. Constitution gives Congress “power to lay and collect taxes on incomes.” Wealth is not income, so courts have found that straight-ahead wealth taxes are unconstitutional.

Biden’s plan gets around that large obstacle by taxing billionaires on the increase in their wealth. That gain, the administration argues, can be considered income: If your horse farm or your Renoir painting doubles in value, that increase can be thought of as income — just like wages from flipping burgers — even if you don’t realize the gain by selling.

Setting up the tax this way — as opposed to as an explicit wealth tax such as the one proposed by Senator Elizabeth Warren, Democrat of Massachusetts — increases the chance that it will pass muster with the Supreme Court (although Warren and her backers say her plan is also constitutional).