.. A family worth $60 million would owe the federal government $200,000 in wealth tax, over and above what they may owe on income from wages, dividends or interest payments.
If the estimates of his net worth are accurate, Mr. Buffett would owe the I.R.S. about $2.5 billion a year, in addition to income or capital gains taxes. The Waltons would owe about $1.3 billion each.
The tax would therefore chip away at the net worth of the extremely rich, especially if they mainly hold investments with low returns, like bonds, or depreciating assets like yachts.
“Presumably, a wealth tax would apply to the same sort of base, except that it would be annual rather than just when a person dies,” said Beth Shapiro Kaufman, an estates lawyer at Caplin & Drysdale.
The very wealthy would have a permanent, continuing need to tally the value of their assets and defend those valuations to the federal government. The Warren plan includes substantial new funding for I.R.S. staff to enforce the law.
And some people may have their wealth tied up in things not easily converted to cash. An early investor in Uber or another company that has achieved a high valuation without going public might have a high enough net worth to owe a wealth tax, but not the easily accessible funds to pay it.
Mr. Zucman argues that people wealthy enough to owe this tax would generally have ample access to credit, and that the law could even be structured to let people pay their tax obligations with illiquid assets.
Gene Sperling, a former National Economic Council director in the Obama and Clinton administrations who now supports a wealth tax, said: “If we were sitting here in 1932 saying we need to create a Social Security system, it would have seemed very complex, but if it’s important enough, you don’t let some complexity become a reason not to push forward.”
Couldn’t rich people just hide their assets overseas?
The wealth tax Ms. Warren proposes would also apply to assets that American citizens own overseas. So in theory, a wealthy American citizen would owe tax on his Panamanian bank account and his Swiss ski chalet.
Ensuring payment would be tricky, which is why the proposal includes all those new I.R.S. employees and stronger international coordination to stop tax avoidance and evasion — as well as an “exit fee” that Americans would need to pay if they sought to renounce their citizenship.
Have other countries tried this? Does it work?
There’s an old line attributed to a 17th-century French politician that the art of taxation is to pluck a goose so as to obtain the largest possible quantity of feathers with a minimum amount of hissing. In the recent past, wealth taxes have failed that test.
In the early 2000s, 10 developed countries had a wealth tax, according to the Organization for Economic Cooperation and Development. That is now down to three: Switzerland, Norway and Spain. France recently changed its wealth tax into a tax only on real estate, more akin to the American property tax.
One problem was that some of the wealth tax plans kicked in at a relatively low level, meaning a vast number of upper-middle-class people faced its nuisance and expense. In Europe, especially, it created incentives for people to relocate.
Mr. Zucman says the United States, as a large country, is better positioned than small countries where wealthy citizens are likely to be highly mobile already. The idea is that Americans will be less likely to renounce their citizenship to avoid paying out a couple of percent of their net worth every year.
Is this even legal?
An income tax is clearly authorized by the 16th Amendment, which states that Congress has the power to “lay and collect taxes on incomes, from whatever source derived.” A wealth tax is more likely to raise constitutional questions, and it’s a near certainty that well-funded opponents would wage a legal battle against it.
(Josh Barro at New York Magazine lays out the legal questions here.)
Is there a simpler way to reduce inequality?
There is. Some tax experts say changes to existing law would accomplish many of the goals of a wealth tax.
One example that Leonard Burman of Syracuse University and the Urban Institute has suggested is to eliminate a provision of current law in which assets that increase in value can go essentially untaxed across generations.
If you start a company and its value appreciates over your lifetime, then it is transferred to a family member upon your death, no capital gains taxes are collected on those decades of appreciation. The family member gets to start over at its current valuation for capital gains purposes.
This “step-up” provision is one of numerous ways that families can accumulate great wealth with minimal taxation. It could be eliminated. Laws could be changed to make it harder to avoid the estate tax, which currently kicks in at about $11 million for an individual and about $23 million for a married couple.
If you want a tax system that leans more aggressively against dynastic wealth and high inequality, there are, in other words, tools that don’t involve quite the risks and challenges of a wealth tax.
But those are a lot harder to capture in a campaign ad, and in the public imagination.