The Ultra-Millionaire Tax, first introduced by Senator Elizabeth Warren in 2021 and reintroduced since, would apply an annual two percent levy on household net worth above 50 million dollars, rising to three percent above one billion. By its sponsors' estimate that reaches roughly the wealthiest one household in two thousand.
This is different from an income tax in a way that matters legally. Income tax applies to money as it arrives. A wealth tax applies to holdings whether or not anything has been earned or sold, which is closer to how property tax works than to how the income tax works.
Sponsors have estimated the revenue at around 2.75 trillion dollars over ten years, based on analysis by economists Emmanuel Saez and Gabriel Zucman. Critics dispute the figure primarily on assumptions about avoidance rather than on arithmetic. The Tax Foundation has estimated a small negative effect on long run economic output, in the range of a few tenths of a percent.
At the top of the wealth distribution, most gains are increases in the value of assets that are never sold. Because American tax law taxes gains only when realized, those increases can go untaxed indefinitely.
The practical mechanism is borrowing. Someone holding a large appreciated position can pledge it as collateral and live on the loan proceeds, which are not income. The debt is settled from the estate, where the step up in basis can eliminate the accumulated gain entirely. None of this is illegal or even unusual. It is standard planning, available to anyone with sufficient assets.
Defenders of the current system note that unrealized gains are not money, and that taxing them requires either a sale or a valuation. Both introduce problems that taxing realized income does not. The counterargument is that estate planning has become effective enough that the gain may never be taxed at any point, in which case realization is functioning less as a timing rule than as an exemption.
Article I of the Constitution requires direct taxes to be apportioned among the states by population, which would be unworkable for a wealth tax. The Sixteenth Amendment exempted taxes on incomes from that requirement in 1913. Whether a levy on holdings counts as a tax on income is the question, and it has never been definitively answered.
The Supreme Court came close in 2024. Moore v. United States challenged a one time repatriation tax on unrealized foreign earnings. The Court upheld it seven to two, but Justice Kavanaugh's opinion was written narrowly and explicitly declined to resolve whether Congress can tax unrealized gains or accumulated wealth more generally. Both sides read the decision as encouraging.
What both sides agree on is that any wealth tax Congress passed would be challenged immediately and would likely reach the Supreme Court within a few years. That uncertainty is itself a policy problem, because a tax that may be struck down is difficult to plan revenue around and difficult for taxpayers to plan against.
Around a dozen OECD countries had wealth taxes in 1990. Most have since repealed them. Germany stopped enforcing its version in 1997 after a constitutional court ruling on valuation. France abolished its wealth tax in 2018 and replaced it with a narrower levy on real estate.
The reasons given were consistent across countries. Valuing private businesses, land and art annually cost more than expected and produced years of dispute. Revenue came in below projections. Mobile capital and mobile people moved. None of these were surprises in principle, but they were larger in practice than the designers assumed.
Norway, Spain and Switzerland still levy one, and the Swiss version is generally regarded as the most functional. It is also the oldest, administered at cantonal level with long established valuation rolls, which is closer to an American property tax than to what is being proposed federally. Advocates cite Switzerland as proof of concept. Critics note that it raises modest revenue at low rates on a small, wealthy and unusually stable population.
Both sides largely accept the underlying facts. Wealth at the top is concentrated and has become more so since 1980. Much of it grows untaxed. European wealth taxes mostly failed on administration and revenue. These are not seriously contested.
The disagreement is about what follows. One side concludes that the European failures were design problems, that valuation technology and information sharing have improved, and that a narrow high threshold version could work where broader ones did not. The other concludes that a policy abandoned by most countries that tried it has failed a real world test, and that the burden sits with the proposal.
That is a disagreement about inference from shared evidence rather than about the evidence itself, which is why more studies have not resolved it and probably will not.
It is worth noting what a wealth tax would not do. It would not change how ordinary income is taxed, would not affect households below the threshold, and would not on its own alter the estate rules that let large fortunes pass with much of their appreciation untaxed. Several economists who support taxing wealth argue that reforming realization and the step up in basis would raise comparable revenue with none of the constitutional risk, which is a third position that rarely gets attention in a debate framed as two.
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