No doubt responding to concerns over the growing inequality of wealth between the top 1% and 10% of families and the far greater number of “other” families, the Biden administration is proposing an innovation in taxation.
The proposal is to tax accumulated wealth directly, not income earned.
The proposed wealth tax is cast as a minimum tax which would assess 20% of the combined income and the increase in value of assets of households worth more than $100 million, some 20,000 households in the U.S.
The tax on unrealized gains of financial holdings and imputed to closely held businesses would bring to the government a share of increasing prosperity reflected in rising prices of equity stocks (and perhaps other financial assets). So, if speculation and trading push nominal stock prices up, the owners of such shares, even if they don’t sell their shares, would pay money to the government.
Similarly, if the economy grows and private companies become more profitable, an imputed new capital value for the company would be determined and a tax in real money would be paid based on that imputed value.
The proposal has its complexities and would generate more money for governments during times of inflation, when real values are constant or falling. But the proposal focuses attention on the moral question of what do very wealthy people owe to the society which permits them to so thrive.