Wealth tax

A wealth tax is an annual levy on a person's net assets, such as stocks, real estate, businesses and other property, minus debts, above a certain threshold. It differs from the income tax, which taxes earnings, and from the estate tax, which applies at death.

Several European countries had wealth taxes in the twentieth century, but most repealed them, citing administrative difficulty, capital flight and low revenue; France, for example, ended its general wealth tax in 2017 and replaced it with a tax on real estate. In the United States, proposals from Senators Elizabeth Warren and Bernie Sanders in 2019 would have taxed households above about $50 million in net worth, with a small percentage rate. Some state proposals have been introduced.

Supporters argue that it addresses concentration of wealth and taxes unrealized gains that the income tax misses. Opponents point to the difficulty of valuing illiquid assets, evasion and economic costs; some constitutional scholars argue that a federal wealth tax would be an unconstitutional "direct tax" not apportioned among the states, an argument tied to the Takings Clause debate in some versions, while others say that it could be upheld. See also capital gains tax.