Solves wealth, generates revenue, it’s enforceable

What can we conclude from our analysis about the prospects for progressive wealth taxation in the United States?

First, the wealth tax is likely to be the most direct and powerful tool to restore tax progressivity at the very top of the distribution. The greatest injustice of the US tax system today is its regressivity at the very top: billionaires in the top 400 pay less (relative to their true economic incomes) than the middle class. This regressivity is the consequence of the erosion of the corporate and estate taxes, and the fact that the richest can escape the income tax by reporting only half of their true economic incomes on their individual income tax returns. A wealth tax with a high exemption threshold specifically targets the richest and could resolve this injustice. Second, our analysis shows that the wealth tax has great revenue and wealth equalizing potential in the US context. Household wealth has grown very large in aggregate (5 years of national income in 2018) and the rich own a growing fraction of it (20% is owned by the top .1% of families). The wealth tax, if the tax rates are high enough, is also a powerful tool to deconcentrate wealth. Wealth among the Forbes 400 has grown about 4.5 percentage points faster annually than average since 1982. A wealth tax of 2 or 3% per year can put a significant dent into this growth rate advantage. With successful enforcement, a wealth tax has to deliver either revenue or de-concentrate wealth.79 Set the rates low (1%) and you get revenue in perpetuity but little (or very slow) de-concentration. Set the rates medium (2-3%) and you get revenue for quite a while and de-concentration eventually. Set the rates high (significantly above 3%) and you get de-concentration fast but revenue does not last long. Which is best will depend of course on ones political views. Can a wealth tax be successfully enforced? Our review of past and foreign experiences, as well as recent empirical work tells us that enforcement is a policy choice. We certainly have plenty of evidence showing that a poorly designed wealth tax generates a lot of avoidance and little revenue. But we also learn lessons about to design a wealth tax well. Cracking down on offshore tax evasion, as the US has started doing with FATCA, is crucial. Taxing expatriates as the US currently does is also very important to prevent the mobile wealthy from avoiding the tax. Third, systematic reporting of wealth balances (instead of relying on self-assessments as for the estate tax) is a necessary condition for good enforcement (as is amply demonstrated in the income tax context). Finally, the issue of valuation of closely held businesses is key for the integrity of the wealth tax. Our view is that the government has to create the currently missing (or highly private) markets for equity of large closely held businesses. It is often the case that accounting rules develop in synergy with the tax system