If social wealth declines standards of living will fall

At this point, the acute tradeoff becomes clear: the only reliable asset class for wealth-taxation purposes is publicly traded stocks and bonds, which of course can decline rapidly in value after the tax is imposed, but also before it is collected. (Think of the position of Elon Musk and others in the class of 2022.) Necessarily, that type of tax will miss the portion of their wealth that they hold in unlisted and illiquid assets, and thus will not satisfy progressives for whom depriving the rich of wealth is every bit as important as providing additional income to the poor.  National wealth taxes face this difficulty, which poses an even greater challenge for a state wealth tax, with its more limited territorial reach.

The revenue collected will fall short of expectations. Worse, the tax will damage the economy. Today’s ablest entrepreneurs will be forced to devote their time to defending their fortunes against the predation by the one or more states that lay claim to their wealth. Wealth creation and income from other sources will both fall as administrative expenses and high-stakes litigation rise. An overall decline in social wealth will likely lead to a reduction of investment and wages and consequently to a lower standard of living and a loss of tax revenues from other sources.

Wealth taxes less ambitious than the current crop have uniformly . Defenders of the tax like  have long claimed that it will not touch ordinary people. But indirect effects matter as much as formal tax liability, and these will touch everyone in society.