It’s likely you’ve heard the term “wealth tax” on the news over the past few years. In the discussions leading up to recent federal elections, some candidates often explained the pros and cons of this tax, in which they proposed collecting from the wealthiest Americans. Let’s take a closer look at what a tax on the wealthy would mean for U.S. taxpayers.
What is a tax on the wealthy?A wealth tax — also commonly referred to as capital tax, equity tax, or net wealth tax — is a government tax on a taxpayer’s net wealth. You can calculate your net wealth by subtracting your debts from your assets. Some assets in this tax calculation may include:
CashPropertyReal estateVehiclesPension plansTrust assetsStocksJewelryPaintingsShares of stock and other investmentsMany of these assets are typically held by taxpayers with a higher net wealth or higher income, giving the wealth tax its name.
TurboTax Premier makes it easy and fast to import, upload, and accurately report your investments, effortlessly. You can auto import over 3500 transactions easily, whether from stocks, crypto, ESPPs, robo-investing, and more. Start for free and get up to an additional $15 off when you file with TurboTax Premier.
Which countries have a wealth tax?Currently, these European countries have enforced a tax on the wealthy:
FranceNorwaySpainOn the other hand, these countries have recently abolished their wealth tax:
AustriaDenmarkFinlandGermanyIcelandLuxembourgScroll to Continue
These countries have recently abandoned this tax mainly due to problems enforcing the tax.
Wealth taxes vary depending on the legislation set forth by each country. For instance, in France, the wealth tax only applies to real estate over U.S. $1.5 million net value, with a tax rate of 0.5% to 1.5% and a limit on the total amount collected. In Norway, the wealth tax applies to the total value of a person’s worldwide net wealth of over about U.S. $172,000, with a tax rate of 0.85%. In contrast, in Spain, the wealth tax applies to those with assets above roughly U.S. $775,000, with a starting rate of 0.2%.
How would I calculate my wealth tax?If the United States were to enact a federal wealth tax, proposals from supporters have suggested that this tax only applies to wealthy Americans in the top 0.1% of the population with a wealth that surpasses an established threshold amount. For instance, some have proposed that the wealth tax should only apply to taxpayers with a net worth of over $32 million.
Let a tax expert do your taxes for you. Get matched with a dedicated tax expert who will complete your taxes from start to finish, keep you in the loop, and review your taxes before filing. We’ll match you with the right tax expert for your unique situation, then you can hand off your taxes and let your expert take it from there. Get your taxes done right and enjoy up to an additional $20 off with TurboTax Live Full Service.
Here’s an example of the government’s revenue difference between income tax and a hypothetical wealth tax: A single taxpayer with $1 million in taxable income, subject to current tax rates for individuals, would pay approximately $334,427 in taxes. That same taxpayer with a net worth of $50 million would pay approximately $1 million (or 2% of 50 million) plus $334,000 between income and wealth tax if a wealth tax is imposed.
Does the United States have a wealth tax?While the United States currently uses a federal income tax system rather than a wealth tax, most places around the country do have property taxes — which is a form of a wealth tax — but those are collected by state and local governments.
The federal estate tax is also used to tax assets and property that are part of a deceased person’s estate, which makes it a wealth tax. Meanwhile, the estate tax is only paid by the estates that exceed a certain level (in the millions of dollars), so most estates do not pay this tax.
It is likely that the debate over the efficacy of a wealth tax in the United States may continue across the country.
Remember, with TurboTax, we’ll ask you simple questions about your life and help you fill out all the right tax forms. With TurboTax, you can be confident your taxes are done right, from simple to complex tax returns, no matter what your situation.