What Is a Wealth Tax? Definition, Assets Covered, and Rates

A wealth tax is an annual tax on the total net value of everything a person owns, assessed on a single date each year rather than on money earned during the year. No federal wealth tax exists in the United States. Several proposals have been introduced in Congress, a handful of countries still impose one, and the constitutional barriers to enacting one in the US are the main reason the debate keeps circling without a bill becoming law.

How It Differs From Income and Property Taxes

An income tax applies to money flowing in: wages, investment gains, business profits. You earn something, the government takes a percentage. A wealth tax skips the earning part. It looks at what you hold on a specific valuation date and charges a percentage of that total, whether or not the assets produced any income that year.

Property taxes, which fund local governments across the country, are technically a narrow form of wealth tax. They apply to real estate and sometimes to tangible personal property like business equipment or vehicles. A broad-based wealth tax goes much further, reaching bank accounts, stocks, bonds, private businesses, art collections, and other financial holdings that property taxes never touch.¹ That broader reach is what makes wealth taxes both attractive to their supporters and difficult to administer.

What Assets Would Be Covered

A broad-based wealth tax would cover nearly everything of value you own. Countries that impose these taxes and proposals that have circulated in Congress generally include the same categories.¹

Real estate, including primary homes, vacation properties, rental buildings, and land.
Financial accounts such as checking, savings, CDs, and money market funds.
Investments: stocks, bonds, mutual funds, and other securities at market value.
Ownership stakes in private companies, partnerships, and LLCs.
High-value personal property, including vehicles, boats, aircraft, jewelry, fine art, and collectibles.
Pension values, retirement account balances, and the cash surrender value of life insurance.
Cryptocurrency and NFTs, which the IRS classifies as property for tax purposes.²

Countries with existing wealth taxes usually exempt certain categories to serve policy goals. Pensions are often excluded to encourage retirement saving. Some jurisdictions carve out a portion of the primary residence’s value to avoid taxing people out of their homes. The design choices matter enormously: a wealth tax that exempts retirement accounts and primary homes looks very different from one that doesn’t.

How Net Wealth Is Calculated

Wealth taxes apply to net worth, not gross assets. The calculation starts by adding the fair market value of everything you own on the valuation date. From that total, you subtract outstanding debts: mortgage balances, car loans, student loans, credit card balances, other liabilities. What remains is your taxable net wealth.

The concept is straightforward. The execution is not. Publicly traded stocks have a clear market price on any given day. A private business, a piece of fine art, or a rare coin collection does not. Valuing illiquid assets is where wealth tax administration gets expensive and contentious, and every valuation judgment creates an opportunity for dispute between taxpayers and the government.

Thresholds and Rates

No serious wealth tax proposal applies to everyone. They are designed with high entry thresholds so that only the wealthiest households are affected, and the structures are typically progressive, meaning the rate climbs at higher tiers.

Senator Elizabeth Warren’s Ultra-Millionaire Tax Act would apply only to households with net worth above $50 million. The rate would be 2% on net worth between $50 million and $1 billion, then 3% above $1 billion. Economists estimated it would apply to roughly 100,000 households.³ The Biden administration’s proposed Billionaire Minimum Income Tax targeted those with wealth exceeding $100 million.⁴

Common exemptions in countries that impose these taxes include partial or full exclusions for primary residences. Spain allows an individual exemption of roughly €315,000 for a primary home, and Norway exempts 75% of the residence’s value. Retirement accounts and certain government bonds are also frequently excluded to avoid discouraging long-term saving.

Why the United States Doesn’t Have One

The reason the US doesn’t have a federal wealth tax isn’t political gridlock alone. It’s the Constitution. Article I, Section 9, Clause 4 states: “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken.”⁵ Any “direct tax” must be divided among the states based on population, so a state with 10% of the nation’s people would owe 10% of the total tax, regardless of how much wealth its residents hold.⁶

That apportionment rule makes a wealth tax nearly impossible to administer fairly. Wealthy people are not distributed proportionally across the population. Wyoming would owe the same per-capita share as California, even though California holds a dramatically larger concentration of billionaires. The result would be wildly different effective tax rates in different states, exactly the kind of inequity a wealth tax is supposed to fix.

The Sixteenth Amendment, ratified in 1913, carved out an exception for income taxes specifically: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States.” That language covers income, not wealth. A tax on what you own rather than what you earn would likely be classified as a direct tax still subject to the apportionment requirement.

The Supreme Court’s 2024 decision in Moore v. United States was closely watched for guidance on this question, but the Court sidestepped it. The majority upheld the Mandatory Repatriation Tax on the narrow ground that Congress can attribute a corporation’s realized income to its shareholders. The Court explicitly declined to decide whether “realization” is a constitutional requirement for income taxation, which is the very question a wealth tax would force.⁷ The constitutional question remains open, and any enacted wealth tax would almost certainly face an immediate legal challenge.

Proposals in Congress and the States

Despite the constitutional hurdles, multiple proposals have surfaced. Warren’s Ultra-Millionaire Tax Act, first introduced in 2021, would impose the 2% and 3% rates described above on households above $50 million in net worth.³

The Biden administration took a different approach with its proposed Billionaire Minimum Income Tax, which would impose a 25% minimum tax on the wealthiest taxpayers, including unrealized capital gains.⁴ By framing it as a minimum income tax rather than a wealth tax, proponents aimed to thread the constitutional needle, though many legal scholars questioned whether taxing unrealized gains would survive court review. Neither proposal has been enacted.

At the state level, California considered a proposed one-time 5% tax on residents with assets exceeding $1 billion. State-level efforts often trigger concerns about capital flight, with wealthy residents simply moving to states without such taxes, which has historically undermined revenue projections.

How Existing US Taxes Already Reach Wealth

The absence of a formal wealth tax doesn’t mean accumulated wealth goes untaxed. Several existing federal taxes target wealth at different points in its lifecycle.

The federal estate tax applies when wealth transfers at death. As of 2026, the basic exclusion amount is $15 million per person, meaning estates below that threshold pay nothing. Estates above it face a top rate of 40%.⁸ The $15 million exemption, established by the One Big Beautiful Bill Act signed in July 2025, is indexed for inflation going forward. The federal income tax code itself is structured around income, not holdings; Title 26 imposes taxes on taxable income across various filing statuses, not on net worth.⁹

Property taxes, levied by local governments, are the closest thing Americans experience to a wealth tax. They apply annually to real estate and, in some cases, tangible personal property. But they miss the financial assets where most extreme wealth is concentrated: stocks, bonds, and private business equity.

Capital gains taxes reach investment wealth, but only when assets are sold. The gap between accumulation and realization is the core argument for a wealth tax. Someone whose stock portfolio grows by $500 million in a year owes nothing until they sell. That “buy, borrow, die” strategy, in which the owner holds appreciating assets, borrows against them for spending money, and passes them on at death with a stepped-up basis, is what wealth tax proponents point to as the fundamental hole in the current system.

Countries That Impose Wealth Taxes

The global trend has been away from wealth taxes, not toward them. France, Sweden, Germany, and Ireland all had wealth taxes and repealed them, citing capital flight, disappointing revenue, and high administrative costs. Germany dropped its wealth tax in 1996. An analysis of France’s former wealth tax estimated the government lost roughly twice as much in reduced revenue from other taxes as it collected from the wealth tax itself.

A handful of countries still maintain wealth taxes, with widely varying designs:

Norway levies a combined municipal and state wealth tax starting at NOK 1.9 million (roughly $197,000) in net wealth. The combined rate is 1% up to NOK 21.5 million and 1.1% above that level.¹⁰
Switzerland levies wealth taxes at the cantonal and communal level, not federally. Rates and thresholds vary significantly. In Zurich, rates run from 0.05% to 0.30% on wealth above roughly CHF 81,000 for single taxpayers. Geneva’s top rate can approach 1%.
Spain applies a regional wealth tax to net assets above €700,000 with rates from 0.16% to 3.5%, plus a national solidarity surcharge on assets above €3 million.
Colombia, as of 2026, sets the threshold at roughly $530,000, with progressive rates from 0.5% to a top marginal rate of 5% on net assets above approximately $28 million.

Norway’s low threshold is striking. It catches a much broader swath of the population than American proposals, which typically start at $50 million or $100 million. Switzerland’s decentralized approach means wealthy individuals can effectively shop across cantons for lower rates.

One detail that catches American expatriates off guard: if you live in a country that imposes a wealth tax, you generally cannot claim a US foreign tax credit for that payment. The foreign tax credit applies to income taxes, war profits taxes, and excess profits taxes, not wealth taxes.¹¹ You’d pay the foreign wealth tax and still owe your full US income tax, with no offset.

1
Tax Policy Center. What Is a Wealth Tax?
2
Internal Revenue Service. Digital Assets
3
United States Senate. Warren, Jayapal, Boyle Introduce Ultra-Millionaire Tax on Fortunes Over 50 Million
4
U.S. Department of the Treasury. U.S. Department of the Treasury Outlines Tax Proposals
5
Congress.gov. Article I Section 9 Clause 4
6
Congress.gov. Overview of Direct Taxes
7
Supreme Court of the United States. Moore v. United States, 602 U.S. ___ (2024)
8
Internal Revenue Service. What’s New – Estate and Gift Tax
9
Office of the Law Revision Counsel. 26 USC 1 – Tax Imposed
10
Skatteetaten. Net Wealth Tax and Valuation Discounts
11
Internal Revenue Service. Foreign Taxes That Qualify for the Foreign Tax Credit