How to Tax Wealth

Shafik Hebous, Alexander Klemm, Geerten Michielse and Carolina Osorio-Buitron

No 2024/001, IMF Fiscal Affairs Department from International Monetary Fund

Abstract: 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.

Keywords: 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 (search for similar items in EconPapers)
Pages: 39
Date: 2024-03-08
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-pub
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