This is an opinion piece from the FinDailyX Editorial Board.
Few ideas in American politics enjoy the across-the-aisle popularity of taxing the very rich. Surveys consistently show large majorities, including a substantial share of Republicans, supporting a minimum tax on billionaires. When roughly two-thirds of the public agrees on anything in this country, it deserves to be taken seriously. But popularity and practicality are different virtues, and the gap between them is exactly where good intentions go to die. If reformers want to raise real money from real fortunes, they should start with the unglamorous work of fixing the code we already have before reaching for a brand-new tax on wealth that has never been sold.
Why the wealth gap is a problem worth naming
Let us not pretend the concern is manufactured. The top one percent of American households now holds close to a third of the nation's wealth, a concentration not seen since the Gilded Age, while the bottom half holds a sliver. A society can tolerate inequality of outcome; it has a harder time tolerating inequality that compounds across generations into something that looks less like a meritocracy and more like an aristocracy. The political energy behind taxing wealth is not envy. It is a reasonable demand that those who have gained the most from the system contribute proportionately to sustaining it.
The trouble with taxing what hasn't been sold
The headline proposals come in two flavors. The first is an outright wealth tax: an annual levy on net worth above some enormous threshold. The second is a billionaire minimum tax aimed at unrealized capital gains, the paper increase in the value of assets that have not been sold. Both target the same uncomfortable fact: the richest Americans hold their fortunes in appreciating assets they rarely sell, borrow cheaply against, and pass on with the gains effectively erased at death.
The intuition is sound. The execution is brutal. Taxing unrealized gains means valuing assets that have no market price, from private companies to art to sprawling real estate, every single year. It means deciding what happens when those values fall. It means confronting liquidity problems for taxpayers who are rich on paper but short on cash, and it invites an army of appraisers, lawyers, and structuring specialists whose entire job is to make the valuation come out low. Countries that experimented with broad wealth taxes have, more often than not, repealed them, citing capital flight and administrative cost. This is not a reason to abandon the goal. It is a reason to be honest that the favorite proposal is the hardest one to run.
The boring fix that actually works
Here is the part nobody puts on a bumper sticker. The single most consequential loophole in the American tax system is not a missing wealth tax. It is the rule that wipes out a lifetime of capital gains the moment an asset is inherited. An entrepreneur can build a fortune, never sell a share, borrow against it to fund a lavish life, and pass the whole thing to heirs who inherit it at its current value, the embedded gain untaxed forever. This is the engine of dynastic wealth, and it runs on a provision that could be changed with a single line of legislation.
Close that loophole, and you tax gains when they are actually realized at death, when there is a transaction, a valuation, and liquidity. Raise the rate on large realized capital gains so that income from owning is not taxed at a permanent discount to income from working. These reforms do not require annually appraising a billionaire's wine cellar. They work within the machinery the IRS already operates. They are estimated to raise serious revenue. And they strike directly at the mechanism that turns a fortune into a hereditary estate.
What the popularity is really telling us
The two-thirds support for taxing billionaires is not an instruction to adopt the most ambitious mechanism on offer. It is a mandate to end the situation in which the wealthiest Americans can arrange their affairs to pay a lower effective rate than their assistants. There is more than one way to honor that mandate, and the more durable way is the one that survives the courts, the accountants, and the next administration.
This is where ambition and effectiveness can quietly part company. A wealth tax makes a stirring slogan and a litigation magnet. A capital-gains overhaul makes a dull press release and a real revenue stream. Reformers who care about results, rather than the satisfaction of a fight, should prefer the second even when the first polls better.
An honest agenda
None of this is an argument for inaction, the favorite refuge of those who would prefer no change at all. The concentration of wealth is real, the public consensus is real, and the policy levers are real. But seriousness means matching the tool to the job. Tax gains when they are realized. End the inheritance escape hatch. Raise rates on the largest gains. If, after all that, the case for a wealth tax on the truly stratospheric remains, make it on the merits and design it to survive contact with reality. The goal is not to win an argument about fairness. It is to actually collect the money, from the people who can most afford to pay it, in a way that lasts.
The views expressed here are those of the FinDailyX Editorial Board and are offered as commentary, not tax, legal, or investment advice.