Only Switzerland raised more than 1% of its GDP from wealth taxes in 2024.
Wealth taxes create practical difficulties, including valuation challenges for private businesses and liquidity issues for asset owners.
These measures also tend to encourage capital flight, discourage entrepreneurship, and penalize safer, low-return investments.
An OECD study noted limited arguments for net wealth taxes when broad personal capital income and inheritance taxes are well-designed.
Opponents argue that wealth taxes represent double taxation on savings already taxed as income.
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The estate tax offers a tested alternative, though it has been eviscerated by multiple reforms over the past 25 years.
In 1972, 6.5% of decedents paid estate taxes, but that share dropped to less than 0.1% by 2021.
The revenue generated fell from 0.4% to 0.08% of GDP despite massive accumulations of inheritable wealth.
Reversing these declines requires restoring tax rates and reducing exemptions to turn-of-the-century levels.
The US could cut breaks on assets like life insurance and end the step-up basis that zeroes out unrealized capital gains at death.
Transforming the system into an inheritance tax levied directly on heirs would address double taxation concerns and encourage estate division.
Capital gains taxes, which max out at 20%, should be raised closer to the 37% top rate applied to labor income.
This adjustment reduces incentives for high earners to reclassify standard wages as investment returns.
Corporate tax rates should move closer to the 35% level held before the Tax Cuts and Jobs Act reduced it to 21%.
