Taxing billionaires would be a great way to fund the fight against coronavirus like AOC says — but only if the US government were drastically different

• The idea of taxing the ultra-wealthy to cover the immense cost of fighting the coronavirus pandemic has gained steam in recent weeks.
• But economists told Business Insider that despite growing public support, taxing billionaires faces so many legal and administrative challenges that it isn't a feasible solution.
• Not only would a wealth tax have to get through both Houses of Congress — it would have to withstand a battle in front of the Supreme Court.
• The IRS would also have to rapidly expand and reorganize itself to be to enforce such a tax, and it's likely that evasion would still likely keep the tax from raising as much government funding as proponents hope.
• The coronavirus pandemic is causing a major budget shortfall for federal and state governments alike.

The United States needs to find a way to cover the spiraling costs of coronavirus pandemic, but researchers say a wealth tax isn't it.

Multimillionaires like Abigail Disney and Congresswoman Alexandra Ocasio-Cortez have called for a new tax on the fortunes of the country's richest people to cover the spiraling costs of the coronavirus pandemic. However, economists tell Business Insider that such a tax faces such steep legal, logistical, and political challenges that it could never be implemented in time.

Calls for a wealth tax that could help bridge the ever-widening gap between America's richest and poorest have strengthened among progressives since Sen. Elizabeth Warren made it a central part of her presidential campaign in 2019.

Surprisingly, some of the loudest advocates for the coronavirus tax hikes are the wealthy themselves. A coalition of 83 multimillionaires including Ben & Jerry's co-founder Jerry Greenfield and Disney heiress Abigail Disney signed an open letter published Monday. According to the letter's signatories, a wealth tax would "ensure we adequately fund our health systems, schools, and security ... immediately. Substantially. Permanently."

Implementing a wealth tax would be really, really difficult

Even before the coronavirus crisis, tax experts told Business Insider that using such a tax to fund public policy priorities might be easier said than done. The biggest problem with a wealth tax would be figuring out how to enforce it, Deutsche Bank Managing Director of Wealth Management Blanche Lark Christerson told Business Insider in 2019.

It's easy for the IRS to figure how much to tax a billionaire's investment portfolios, Christerson said, but the value of other assets like yachts and fine art are up for interpretation would require the agency to rapidly expand its ranks.

Many ultra-wealthy people would also simply move their resources or themselves out of the country to avoid the tax, in addition to strongly lobbying their lawmakers to add in loopholes, Senior Research Fellow at the American Institute for Economic Research Phil Magness told Business Insider.

"A wealth tax on billionaires isn't going to raise what you think it is and it is going to do a lot of economic harm so its the worst thing you can do in response to a pandemic," economist Wayne Winegarden, a senior fellow in business and economics at the Pacific Research Institute added.

Any wealth tax also faces legal challenges that could delay its implementation for months or even years, according to Magness. The constitutionality of such a tax would likely end up debated in front of the Supreme Court for years as well.

"If you're expecting a seamless implementation of a wealth tax simply because the IRS has been given the power to implement it and Congress has decreed it, I'd say that someone who is advocating that is operating in a fantasy land," Magness said.

The pandemic has brought the wealth tax debate back to the forefront

However, the urgency of the coronavirus pandemic has already changed some minds about the necessity of a wealth tax. The International Monetary Fund, a global organization that works to promote economic stability published a policy paper urging governments to consider wealth taxes to pay for their coronavirus relief efforts. The global organization has long favored tax cuts but became more open to taxing the wealthy as a way to solve growing inequality across the globe as economic growth slowed in the years leading up to the pandemic, Business Insider's Joseph Zeballos-Roig reported in April. Citi executive Luigi Pigorini told Bloomberg in June that both he views such a tax as a real possibility.

Even if it doesn't end up being a wealth tax, both the federal government and state governments need to find some way to cover the ballooning bill for their coronavirus relief efforts. The United States alone has spent more than $6 trillion on health care and economic stimulus throughout the crisis, leading to a projected $3.8 trillion budget deficit in 2020, according to nonpartisan think tank Committee for a Responsible Federal Budget.

Other reforms including a tax exemption on debt and a temporary repeal of the payroll tax have been floated as ways to manage the fiscal fallout of the coronavirus crisis, but Winegarden, the Pacific Research Institute economist, the best thing the government can do is invest in science-backed initiatives to bring the outbreak to a swift end.