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    There is talk
    in the U.S.
    about taxing
    the wealth
    of the superrich. Without
    engaging in
    d i s c u s s i o n
    about proper
    policy today, I would like to explore
    the concept of a wealth tax in the
    Jewish tradition. Should CEO’s of
    tech companies pay taxes on their
    accumulated wealth?
    I. Jewish Wealth Tax
    Historically, Jewish communities in
    various times and places have had
    to tax their members. When Jewish
    communities are able to self-govern,
    they need to fund basic operations and
    also charitable works. Additionally,
    some governments have assigned tax
    amounts to a Jewish community and
    delegated the task of allocation and
    collection to community leadership.
    This leaves the decision of how
    to tax to Jewish leadership. The
    Talmud (Bava Basra 7b) discusses
    how to allocate the taxes fairly. The
    conclusion, taken in conjunction
    with Bava Kamma (116b), is that
    life-saving measures are allocated
    among citizens individually based on
    risk (roughly, a head tax); everything
    else is allocated based on assets (a
    wealth tax). Rabbeinu Asher (14th
    cen., Germany-Spain; Rosh, Bava
    Basra 1:22) explicitly applies this
    to Medieval taxation in the Jewish
    community. Nearly all taxes must be
    allocated according to wealth; there
    is no Jewish income tax.
    Because of historical circumstances,
    a wealth tax had to be administered
    in many different times and places.
    Local customs and best practices
    emerged. I would like to explore
    here the Jewish tax practices in 15th
    century Germany and Austria. In
    general, the way taxation worked
    in this period is that there was an
    annual tax on the Jewish community
    based on population size, business
    volume and wealth. Additionally, a
    local lord could calculate a special
    tax depending on how much he
    needed and how many people or
    assets the Jews had. There would
    be negotiation between the Jewish
    communal leaders and the lord to
    arrive at a final amount. Then the
    Jewish leaders would assess a tax on
    the community members to raise the
    negotiated sum. If they did not reach
    the necessary amount, they would
    increase the tax until they could pay
    the lord. (On all this, see R. Bernard
    Rosensweig, Ashkenazic Jewry in
    Transition, ch. 6.)
    II. What is Taxable?
    Rav Yisrael Isserlein (15th cen.,
    Austria) was one of the leading rabbis
    in greater Germany. Rav Isserlein
    was asked by a community how to
    allocate taxes and responded at
    great length, detailing common
    taxation practices of his time
    (Terumas Ha-Deshen 1:342). He
    begins by quoting Rav Menachem
    of Merseburg who says that most
    matters of taxation depend on
    custom, even against the Talmud.
    Rav Isserlein spends a good deal
    of time defining who falls under
    a tax. There is no limit to the
    creativity of someone trying to
    avoid taxation. Therefore, the
    community has to be careful to
    close loopholes and not to allow, for
    example, someone to leave a city
    just before a major tax assessment
    without paying his fair share.
    The key to assessing wealth is
    defining which assets are taxable.
    The general rule is that tax is only
    assessed on income generating assets.
    This is apparent from a responsum of
    Rav Hai Gaon (11th cen., Babylonia)
    that Rav Isserlein quotes. For
    example, a house where you live is
    not taxed but a house that you rent to
    others is taxed because you receive
    income on the rental property. The
    details of this definition and the
    exceptions vary based on custom. In
    general, community leadership acted
    flexibly and quickly to tax or exempt
    certain assets in order to prevent tax
    avoidance and to remove perverse
    incentives to abandon specific
    occupations in favor of others.
    III. Cash and Interest
    There is a difference of customs
    regarding accumulated money
    (not assets but specifically cash).
    If you do not lend or invest it but
    rather give it to a trusted third
    party to hold, the money does not
    generate income. According to Rav
    Hai Gaon and another unnamed
    scholar (gadol
    echad), you
    should not have
    to pay taxes on
    the accumulated
    cash. However,
    Rav Chaim Or
    Zaru’a (13th
    cen., Germany)
    rules that you
    must pay taxes
    on accumulated
    money and Rav
    Isserlein follows
    this view because
    the government
    assesses tax on
    accumulated cash
    ( p r e s u m a b l y,
    because it can
    easily be lent for
    Jews were forced into the
    moneylending business because
    they could charge interest to
    gentiles. Do you have to pay
    taxes on uncollected accumulated
    interest on loans? The interest is
    unrealized profit. Rav Isserlein
    says that the custom is not to pay
    tax on accumulated interest for
    three reasons: 1) the interest was
    never in your possession, 2) there
    is uncertainty whether the interest
    will be paid at all — borrowers
    often default on loans, and 3) you
    do not earn income on the interest.
    None of these reasons is sufficient
    on its own but together they exempt
    uncollected interest on a loan. Rav
    Ya’akov Weil (15th cen., Germany;
    Responsa Mahari Weil, no. 133) adds
    that interest becomes taxable when
    the due date arrives, i.e. when it is
    collectible immediately.
    Rav Isserlein covers many more
    details about taxes. He is not the only
    authority to do so but, in my opinion,
    he is the most comprehensive and
    clear about it. Significantly, Rav
    Moshe Isserles (16th cen., Poland)
    rules on these issues — generally
    following Rav Isserlein — in his
    glosses to Shulchan Aruch (Choshen
    Mishpat 163:3).
    IV. Modern Applications
    If we would follow these customs
    for a Jewish wealth tax, we would
    tax people based on their invested
    assets and income-generating bank
    accounts, as well as any businesses
    and other income-generating assets
    they own (plus jewelry). We would
    tax them on accumulated cash but not
    on unrealized gains on investments
    (like uncollected interest on loans).
    For example, tech CEO’s with
    billions of dollars in stocks would
    not pay taxes
    on most of the
    a c c u m u l a t e d
    stock value
    because it
    r e m a i n s
    unrealized and
    without a due
    The question
    remains why
    Jewish tradition
    does not have an
    income tax. If
    we tax incomeg e n e r a t i n g
    assets as
    a general
    rule, albeit
    with many
    exceptions, why not just simplify
    things with an income tax? I suspect
    the answer is that calculating income
    requires detailed record-keeping. In
    pre-modern times, it was easier to
    value someone’s assets on a given
    day than to calculate what he earned
    over the previous year. If so, perhaps
    a Jewish community today that
    needed to assess taxes would adopt
    an income tax instead of a wealth tax
    because this type of record-keeping
    is now standard.