“Wealthy clients should pay close attention to what is happening within the state they reside, where it may be more realistic to get the broad support needed to move the idea forward,” Preus said. Increased taxes on homes over a certain value, for example, are a popular target. Expanding that type of tax to other assets—investments, businesses, other real estate—may not be a huge leap, he said.
Details are key with state-level wealth taxes. “With the passage of the Massachusetts millionaire’s tax, folks earning in excess of $1 million of taxable income pay an additional 4% income tax on that excess,” Pantekidis said. “However, they also passed a state charitable deduction on certain types of income, as one example of an opportunity to reduce taxes.”
Wealth taxes are “certainly an unfair tax in my opinion, as most pay taxes throughout their entire lives only to be taxed again at death,” Primeau said. “Some amount of wealth will likely be exempt from the tax and, if the step-up in basis provision remains in place, they will be able to shelter some of their wealth from estate and income taxes.”
“This is a very broad topic that has garnered lots of media attention – for good reason – but it is too early to tell whether a typical wealth tax will ever be passed in the United States,” Pantekidis added. “We believe the cons definitely outweigh the pros and there are better, more efficient, ways to raise government revenue.”