There is a proposal to tax the wealth of billionaires in California. At first glance, it seems simple enough: take the net worth of the wealthy, multiply it by the tax rate (in this case 5 percent), and send a tax bill. But this simplicity masks a fundamental question. What exactly is that net worth? What number, precisely, is being taxed?
The corporate alternative minimum tax, enacted in 2022 as part of the Inflation Reduction Act, imposes a 15% minimum tax on “adjusted financial statement income” for certain large corporations and has multiple shortcomings. CAMT is conceptually flawed, involves very high compliance costs, does not meaningfully change corporations’ incentives, and raises little revenue.
Our analysis examines CAMT’s impact on corporate tax planning and estimated tax revenue, demonstrating that despite imposing substantial new compliance and planning costs, CAMT appears to have done little to change who pays corporate income tax or how much they pay.
California is considering a one-time tax on the wealth of billionaires. Two recent reports attempt to estimate the fiscal effects of the proposal.
Recent wealth tax proposals cite billionaire political influence as a key concern, arguing that reducing concentrated wealth would diminish political power. But would wealth taxes actually achieve this goal? This analysis examines whether the amounts required to influence elections and policy are large enough that wealth taxation would meaningfully constrain political spending by the very wealthy—and finds that political influence may be far cheaper than advocates assume.
“Fairness” is invoked across the political spectrum in tax debates, yet the word means fundamentally different things to different advocates—from keeping what you earn to redistributing resources. This analysis argues that the vagueness of “fairness” as a policy objective obscures real tradeoffs and leads to symbolic legislation designed to satisfy feelings rather than solve clearly defined problems. Examples include the Corporate Alternative Minimum Tax and stock buyback excise tax.
Wealth tax proposals often sound modest when expressed as a percentage of assets—but how do they compare to income taxes in economic terms? By examining the relationship between wealth and the income it generates, this analysis demonstrates how to convert wealth tax rates into their income tax equivalents. The results reveal that seemingly small wealth taxes can translate into surprisingly high effective tax rates on income, depending on rates of return.