How to Tax Wealth

Tackling income and wealth inequality is at the top of the policy agenda in many countries. This note discusses three approaches of wealth taxation, based on (1) returns from capital income tax, (2) stocks from a wealth tax, and (3) transfers of wealth through an inheritance tax.
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Volume/Issue: Volume 2024 Issue 001
Publication date: March 2024
ISBN: 9798400266881
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Topics covered in this book

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Economics- Macroeconomics , Taxation - General , Economics / General , income inequality , wealth inequality , wealth tax , capital income tax , estate tax , capital gains , tax loopholes , tax administration , income taxation , one-off wealth taxes , estate tax tax rate , tax planning , tax sensitivity , Income , Capital income , Income and capital gains taxes , Global , Income tax systems

Summary

Tackling income and wealth inequality is at the top of the policy agenda in many countries. This note discusses three approaches of wealth taxation, based on (1) returns with a capital income tax, (2) stocks with a wealth tax, and (3) transfers of wealth through an inheritance (or estate) tax. Taxing actual returns is generally less distortive and more equitable than a wealth tax. Hence, rather than introducing wealth taxes, reform priorities should focus on strengthening the design of capital income taxes (notably capital gains) and closing existing loopholes, while harnessing technological advances in tax administration—including cross-border information sharing—to foster tax compliance. The inheritance tax is important to address the buildup of dynastic wealth.