Taxing Wealth in an Uncertain World

33 Pages Posted: 10 Sep 2019 Last revised: 10 Mar 2020

See all articles by Daniel J. Hemel

Daniel J. Hemel

New York University School of Law

Date Written: September 2, 2019


An annual wealth tax, a mark-to-market income tax, and a retrospective capital gains tax are three approaches to capital taxation that yield roughly equivalent outcomes under certain conditions. The three approaches differ starkly, however, in their exposure to uncertainty of various types. This essay seeks to highlight the effect of uncertainty on the implementation and operation of alternative capital taxation regimes. An annual wealth tax is highly vulnerable to valuation uncertainty and constitutional uncertainty, but less so to political uncertainty. A retrospective capital gains tax, by contrast, minimizes valuation uncertainty and effectively eliminates constitutional uncertainty but remains highly exposed to political uncertainty. A mark-to-market regime falls somewhere between the two extremes on dimensions of political and constitutional uncertainty but shares in a wealth tax’s exposure to valuation uncertainty. Ultimately, the choice among alternative capital taxation regimes reflects a tradeoff among uncertainties of different varieties.

Keywords: wealth tax, mark-to-market income tax, retrospective capital gains tax

JEL Classification: K34, H20, H21, H24

Suggested Citation

Hemel, Daniel J., Taxing Wealth in an Uncertain World (September 2, 2019). National Tax Journal (Dec. 2019 Forthcoming), U of Chicago, Public Law Working Paper No. 729, University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 897, Available at SSRN:

Daniel J. Hemel (Contact Author)

New York University School of Law ( email )

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