What is a Wealth Tax?
A wealth tax is a tax which is levied on the wealth held by a person or entity. The tax rate is typically a percentage of the taxpayer’s calculated net worth, but it can vary depending on total net worth and the taxing nation’s specific laws. Several countries use this form of taxation to raise funds for the government, though arguments for and against this approach certainly exist.
Most wealth taxes around the world are based on net worth, which is typically found by totaling the taxpayer’s assets, and then subtracting debts, such as loans and mortgages. Assets include cash deposits, real estate holdings, investments, trusts, and shares in businesses. Since wealth taxes mean that a nation’s wealthiest taxpayers have to pay a proportionately higher amount in taxes than their poorer counterparts, it is considered a type of progressive tax.