The United States does not have a wealth tax at the federal level. Federal law taxes income when you earn it and assets when you sell or transfer them, but it does not tax you for simply owning valuable property. Several bills in Congress would change that for households worth more than $50 million, and a handful of states are testing narrower versions, but every serious proposal runs into the same pair of obstacles: an unresolved constitutional question and the practical difficulty of valuing private wealth every year.
Why Federal Taxes Don’t Reach Wealth Itself
The federal system is built on the realization principle. You owe tax on a gain only when you cash it in. If your stock portfolio doubles and you never sell, the IRS has no claim on that growth. A wealth tax works the opposite way: it would be owed every year based on what your assets are worth, whether or not you sold anything.
That realization requirement opens a well-known planning strategy. Rather than sell appreciated stock or real estate and trigger capital gains tax, wealthy individuals borrow against those assets to fund their spending. Loan proceeds aren’t taxable. When the borrower dies, heirs inherit the assets with a cost basis stepped up to fair market value at the date of death, permanently erasing the unrealized gains that built up over a lifetime.1Office of the Law Revision Counsel. 26 U.S. Code 1014 – Basis of Property Acquired From a Decedent
The federal estate tax does apply at death, but only to estates exceeding roughly $15 million in 2026, and sophisticated planning often reduces even that.2Internal Revenue Service. Estate Tax Enormous fortunes can compound for decades without generating a meaningful federal tax bill. Closing that gap is the whole point of the wealth tax proposals now moving through Congress.
The Federal Proposals Currently on the Table
The Ultra-Millionaire Tax Act
The most prominent proposal is the Ultra-Millionaire Tax Act, reintroduced in March 2026. It would impose a 2% annual tax on the net worth of households and trusts above $50 million, with an additional 1% surtax on net worth above $1 billion, for a 3% top rate.3Congress.gov. H.R. 8085 – Ultra-Millionaire Tax Act of 2026 Net worth means the fair market value of all assets worldwide minus all debts.
The bill’s sponsors estimate it would reach roughly 260,000 households, the wealthiest 0.15% of American families.4U.S. Senator Elizabeth Warren. Ultra-Millionaire Tax Act of 2026 Everyone below the threshold is unaffected. Enforcement provisions are aggressive: the IRS would be required to audit at least 30% of covered taxpayers each year, and undervaluation triggers steep penalties tied to how far off the reported figure is.5Congress.gov. H.R. 8085 – Ultra-Millionaire Tax Act of 2026 – Text
The Billionaire Minimum Income Tax
A related bill from the 118th Congress took a different route. The Billionaire Minimum Income Tax Act would impose a 25% minimum tax on the combined total of a taxpayer’s regular taxable income and their net unrealized gains for the year, applied to individuals with net worth exceeding $100 million.6Congress.gov. H.R. 6498 – Billionaire Minimum Income Tax Act – Text
The framing is deliberate. By structuring the levy as a tax on income, including unrealized appreciation, rather than a tax on total net worth, proponents argue it has a better shot at surviving the constitutional challenges a pure wealth tax would face. Whether courts would accept that distinction is untested.
The Constitutional Problem
The largest obstacle to a federal wealth tax isn’t political. It’s Article I, Section 9 of the Constitution, which provides that “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census.”7Constitution Annotated. ArtI.S9.C4.1 Overview of Direct Taxes Apportionment would require each state to contribute revenue proportional to its share of the national population. California’s billionaires would generate far more revenue per capita than Wyoming’s, which makes a wealth tax nearly impossible to administer if courts classify it as a “direct tax.”
The 16th Amendment, ratified in 1913, carved out one escape hatch. Congress can tax “incomes, from whatever source derived” without apportionment.8Legal Information Institute. U.S. Constitution Annotated – Overview of Sixteenth Amendment, Income Tax That’s the legal backbone of the federal income tax. The unresolved question is whether “income” reaches unrealized appreciation, and whether an annual tax on total net worth counts as an income tax at all.
Two 19th-century Supreme Court decisions cut in opposite directions. Hylton v. United States (1796) upheld a federal tax on carriages and read “direct taxes” narrowly, limited to head taxes and taxes on land.9Justia. Hylton v. United States, 3 U.S. 171 (1796) A century later, Pollock v. Farmers’ Loan & Trust Co. (1895) struck down a federal income tax on rents from real estate, holding that a tax on the income of real estate is itself a direct tax requiring apportionment.10Justia. Pollock v. Farmers’ Loan and Trust Co., 157 U.S. 429 (1895) The 16th Amendment overrode Pollock’s result for income taxes but left the broader direct-tax principle intact. The two precedents have never been fully reconciled, largely because Congress has never enacted a federal wealth tax to force the question.
What Moore v. United States Did and Didn’t Decide
Many observers expected the Supreme Court’s 2024 decision in Moore v. United States to settle whether the Constitution requires income to be “realized” before Congress can tax it. The case involved a one-time tax on accumulated foreign corporate earnings under the 2017 Tax Cuts and Jobs Act. The Moores argued that taxing them on income their foreign corporation earned but never distributed violated the 16th Amendment.
The Court upheld the tax on narrow grounds. The majority concluded the corporation had already realized the income, and Congress was simply attributing it to the American shareholders. The opinion said plainly: “Nor does this decision attempt to resolve the parties’ disagreement over whether realization is a constitutional requirement for an income tax.”11Supreme Court of the United States. Moore v. United States, No. 22-800 (2024) The constitutional status of a pure wealth tax, or a tax on unrealized gains, is essentially where it was before Moore. The next definitive test will come only if Congress passes such a tax and someone challenges it.
The Valuation Problem
Even if a wealth tax cleared the constitutional bar, it would still have to be administered. Publicly traded stocks, bonds, and bank accounts have prices that update daily. Everything else is harder.
Private businesses, commercial real estate, venture capital stakes, art, and intellectual property don’t trade on public markets. Proposals typically require annual appraisals from taxpayers, using methods like the most recent funding round for private companies or independent assessments for real estate and collectibles. The Ultra-Millionaire Tax Act defines net worth by subtracting all debts from the fair market value of all global assets, so nothing is excluded, including offshore accounts, foreign real estate, and cryptocurrency.
Those appraisals aren’t cheap. Commercial real estate appraisals range from a few hundred dollars for simple properties to over $10,000 for complex holdings. Formal business valuations commonly run $5,000 to $50,000 or more. Art, jewelry, and classic cars need certified specialists. A household with diverse holdings across multiple asset classes could easily face six-figure annual compliance costs before paying the tax itself.
The IRS would also need new verification systems. Today the agency leans heavily on third-party reporting: employers file W-2s, banks file 1099s. No equivalent reporting exists for the value of a privately held business or a collection of rare paintings. Auditing self-reported values of assets with no public market is a fundamentally different problem than checking a reported salary.
Exit Taxes and Anti-Avoidance
Wealth tax proposals assume some taxpayers will try to move assets offshore or renounce U.S. citizenship. The Ultra-Millionaire Tax Act includes a 40% exit tax on the wealth of ultra-millionaires and billionaires who give up their citizenship to escape the tax.12Congresswoman Pramila Jayapal. Jayapal, Warren, Boyle, 45+ Lawmakers Renew Push for Wealth Tax on Ultra-Millionaires and Billionaires The rate is set to make expatriation more expensive than paying the tax.
Existing law already imposes an exit tax. Under IRC 877A, anyone who renounces U.S. citizenship or ends long-term residency is treated as having sold all their property at fair market value the day before their expatriation date.13Internal Revenue Service. Expatriation Tax The rule applies to “covered expatriates,” meaning individuals with a net worth of $2 million or more, or whose average annual net income tax over the prior five years exceeds an inflation-adjusted threshold. A portion of the deemed-sale gain is excluded — $890,000 in 2025 — and the rest is taxed as a capital gain.
A wealth tax exit provision would stack on top of that. The Ultra-Millionaire Tax Act also calls for expanded third-party reporting building on existing information-sharing agreements under the Foreign Account Tax Compliance Act (FATCA).4U.S. Senator Elizabeth Warren. Ultra-Millionaire Tax Act of 2026
State-Level Efforts
States have more legal room to tax wealth because the Constitution’s apportionment requirement for direct taxes applies only to Congress. A few have started experimenting.
California cleared a ballot initiative for signature gathering in 2026 that would impose a one-time 5% tax on individual net worth exceeding $1 billion. Washington enacted a tax on the sale of long-term stocks and bonds, capturing some wealth growth through capital gains. Minnesota added a 1% surcharge on net investment income above $1 million, modeled on the federal Net Investment Income Tax.
None of these is a comprehensive annual net worth tax. They are narrower tools, targeting specific asset sales or investment income rather than total wealth. They function as real-world test cases for the administrative questions any federal wealth tax would face: how to value assets accurately, how to prevent wealthy residents from relocating, and whether projected revenue actually shows up.
What Happened When Other Countries Tried
The international track record is discouraging. Among OECD member countries, 12 had net wealth taxes in 1990. By 2017, only four remained: Norway, Spain, Switzerland, and France. Austria, Denmark, Germany, Finland, Iceland, Luxembourg, and Sweden all repealed theirs during the 1990s and 2000s.14OECD. The Role and Design of Net Wealth Taxes in the OECD The common complaints were consistent: the taxes raised less revenue than projected, pushed capital to friendlier jurisdictions, and cost more to administer than other forms of taxation.
France later replaced its broad wealth tax with a narrower levy limited to real estate. The countries that kept theirs generally apply low rates with high exemption thresholds. Proponents of a U.S. wealth tax argue America’s global reporting infrastructure, particularly FATCA and its network of international information-sharing agreements, would make enforcement more effective than what European countries attempted. That confidence has not been tested.