About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 1 (May 4, 2021)

handle is hein.crs/govedel0001 and id is 1 raw text is: May 4, 2021 An Economic Perspective on Wealth Taxes The idea of imposing a tax on individual wealth has appeared in policy debates with increasing frequency. Proponents of a wealth taxhave primarily argued that such a taxwould achieve three objectives. First, a wealth tax would mitigate rising wealth inequality. Second, the tax would raise significant revenue that couldbe used to address debt and deficit concerns, and fund a variety of socialpolicies. Finally, the taxcould capture some income sources that currently are not taxed (e.g., unrealized capital gains or types of imputed income). This In Focus presents an economic perspective on wealth taxes. Because no federal wealth taxcurrently exists,the discussion in this In Focus is primarily in terms of a generalwealth tax. Designing such a taxwould require careful consideration about a number ofspecific issues. Where appropriate, the discussionhighlights specific points of consideration. Overview At its most basic level, wealth is the value of allas sets (e.g., stocks, bonds, realestate, art) owned by an individual minus the value of their liabilities. As shownin Figure 1, the concentration of wealth in the top 10% (i.e., top 1% plus next 9%) of the wealth distribution in the United States has increased over the past 30years. The increasehas been largest for the wealthiest households. The share owned by the top 1% rose by the greatest amount, from23.4% in the third quarter of 1989 to 31.4% in the fourth quarter of 2020. Over the same time period, the holdings of the top 1% of the wealth distribution have shifted toward stocks and businessholdings. Figure l. Share of Total Wealth by Wealth Percentile Group in the United States, 1989 to 2020 %of totaI wealth s~) 50% 90% 9293 Source: Board of Governors of the Federal Reserve System. Notes: Quarterly data from Q3 1 989 to Q4 2020. Potential Policy Issues Enactment of a wealth taxwould represent a significant change in U.S. taxpolicy. The change would raise a number ofpolicy issues and questions that Congress may choose to address. Revenue Yield The Joint Committee on Taxation (JCT) would provide Congres s with an officialrevenue estimate of any wealth taxproposal. A number of outside think-tank and academic researchers have proposed revenue estimates of wealth taxes, which vary depending on the assumed design of the tax. For example, the Tax Policy Center (TPC) examined three stylized wealth taxes: 1. a tax equal to 1% ofnet wealth over $20 million ($40 million forjoint filers); 2. a tax equal to 1% ofnet wealth between $20 million and $100 million ($40 million and $200 million forjoint filers) and 2% ofnet wealth over $100 million; and 3. a tax equal to 1% ofnet wealth between $100 million and $1 billion and 2% ofnet wealth over $1 billion. The TPC estimates these three versions would raise $1.1 trillion, $1.6 trillion, and $800 billion in revenues, respectively, in the first 10 years, though they emphasize revenue estimates are highly uncertain. The uncertainty surrounding wealth taxrevenue estimates is illustrated by the broad range ofestimates of a legislative proposalby Senator Warren (5.510). The proposal would levy a 2% tax on net wealth above $50million plus an additional 1% taxon wealth over $1 billion. Annual estimates for this proposalrange from$117 billion (Smith, Zidar, and Zwick) to $275 billion (Saez and Zucman). Authors of these estimates have noted the difficulty in determining the magnitude of behavioral responses and avoidance behavior that would occur if the proposal were enacted. Valuation Determining the value of assets is a crucial aspectof implementing a wealth tax. Valuations ofbank accounts and as sets that are readily traded on financial markets, such as stocks and bonds, would berelatively straightforward, although when suchv aluations were made would be important given fluctuations in asset values overtime. https://crs rept

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most