Democratic Presidential candidate and Massachusetts Senator Elizabeth Warren is proposing a federal wealth tax. It would impose annual taxes of 2% on those with household wealth—net worth, not income—of over $50 million and 3% on those with over $1 billion.
While the US has never had a wealth tax, we do have a version of it in the form of real estate property taxes. These are commonly imposed by municipalities, counties, and states, with annual rates ranging up to 4% of a property’s value.
Almost every person who owns a house, commercial building, or investment property pays property taxes in amounts similar to those proposed by Sen. Warren. How is a wealth tax much different?
Primarily, it is simply not practical. Here are two reasons why.
1. Asset Amnesia
South Dakota once had a wealth tax of sorts, a personal property tax on the value of household goods, personal effects, home appliances, and sporting goods. I remember my father filling out the personal property tax form every year.
Others old enough to remember this tax have told me about its amazing physiological impact. Completing the form resulted in severe short-term amnesia and brain fog. As extension economist Gordon D. Rose wrote in his December 1973 newsletter, “The temptation to ‘forget’ to list certain items of personal property is very great when one observes the behavior of his friends and neighbors.”
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