Most Americans pay an annual wealth tax on their largest asset. It’s called property tax.
Each year, they pay an amount equal to a small percentage of the estimated value of their house, and a house is by far the most valuable item that most families own.
The very rich are different. While they pay property taxes too, their homes tend to make up a tiny share of their net worth. The bulk of their assets are not taxed.
In past decades, other taxes — like the corporate tax (the burden of which falls on stockholders) and the estate tax — served almost as de facto wealth taxes.
But those other taxes have declined, causing the total federal tax rate on the wealthy to plummet:
Over the same period, wealth inequality has soared:
Today, the wealthy both own a much larger share of the country’s assets than they once did and pay less tax on each dollar of assets. This combination creates problems for everybody else. Many Americans own only modest assets, and the federal government struggles to raise enough tax revenue to pay for society’s needs, like education, health care, transportation, scientific research and the military.
This week, Senate Democratic leaders proposed a solution, in the form of a new kind of wealth tax. People with at least $1 billion in net worth or $100 million in annual income would be taxed each year on the increase in the value of many of their assets.
The fate of this specific tax is uncertain, after Senator Joe Manchin expressed skepticism of it yesterday. But wealth taxes — which also featured in the 2020 Democratic presidential campaign — will probably remain part of the political debate in the years ahead, given the country’s level of inequality.
