Wealth Taxation: An Overview of the Issues

Forthcoming in Maintaining the Strength of American Captalism, eds. Melissa S. Kearney and Amy Ganz (Aspen Institute Economic Strategy Group, 2019)

20 Pages Posted: 15 Oct 2019 Last revised: 13 Nov 2019

See all articles by Alan D. Viard

Alan D. Viard

American Enterprise Institute

Date Written: October 3, 2019

Abstract

Two Democratic presidential candidates, Senator Elizabeth Warren (D-Massachusetts) and Senator Bernie Sanders (I-Vermont), have proposed annual wealth taxes. Annual wealth taxes have been adopted in a number of European countries (many of which later repealed them), but not in the United States. Although the proposed wealth tax rates appear low, they are equivalent to high-rate income taxes. Due to the pronounced concentration of wealth in the United States, a wealth tax would be highly progressive. The tax would probably reduce national saving and investment to some extent, although capital inflows would ameliorate the investment reduction. Congress would likely add exemptions for selected assets, which would be distortionary and diminish the tax’s revenue yield. The tax would face compliance and administration challenges due to undervaluation and concealment of assets and it might be ruled unconstitutional in the absence of suitable modifications. Although those challenges would probably not be insurmountable, it would be simpler and more prudent to pursue any desired increase in tax progressivity through reforms of the income tax and estate and gift taxes.

Suggested Citation

Viard, Alan D., Wealth Taxation: An Overview of the Issues (October 3, 2019). Forthcoming in Maintaining the Strength of American Captalism, eds. Melissa S. Kearney and Amy Ganz (Aspen Institute Economic Strategy Group, 2019). Available at SSRN: https://ssrn.com/abstract=3464263 or http://dx.doi.org/10.2139/ssrn.3464263

Alan D. Viard (Contact Author)

American Enterprise Institute ( email )

1150 17th Street, N.W.
Washington, DC 20036
United States
(202) 419-5202 (Phone)
(202) 862-7177 (Fax)

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