The idea of a minuscule 1% Wealth tax has been promoted recently, but what I think would be better is a truly progressive tax on all wealth gains regardless of source – whether it be through employment income, capital gains, or gifts and inheritances.
What reasonable objection can there be to a tax regime which says you can keep 1/n of the nth $million of whatever wealth you gain, by any means whatsoever, in any given year?
This would mean (since 1/1=1) that there would be no tax at all on the first million dollars of income.
The second million would be taxed at a rate of 50%
The third at 67%.
And so on.
So an income of $2million (either from employment, capital gains, or inheritance) would yield an after-tax gain of $1000000+$500000=$1500000 for an effective tax rate of 25%
$3million would yield $1500000+$333333=$1833333 for an effective tax rate of 39%
$4million would yield $1833333+$250000=$2083333 for a net rate of 48%
And an income of $ten million (either from employment, capital gains, or inheritance) would yield an after-tax gain of
$1000000+$500000+$333333+… …..+$111111+$100000=$2,930,000
for an effective tax rate of 71%.
And, yes, the marginal tax rate would be unlimited, so an inheritance of $1billion, if paid all at once, would have a marginal tax rate (on the last million) of 99.9% but the amount the poor exploited child would get to keep would still be almost $7.5 million.
But if the transfer was spread out over several years the tax impact would be a lot less – which might perhaps provide a useful incentive for effective succession planning!
The revenue (and taxpayer impact) of such a system could easily be adjusted by just changing the tax-free amount and step size from a million dollars to some other amount (such as, say, $100k)