After years of debate, discussion and indecision over income gaps, some states have proposed laws to tax the uber-rich even as President Biden calls for the same. Is America ready to cross this major threshold of taxation?

The U.S. may or may not eventually tax the wealthy – but some states aren’t waiting to see.

Wealth tax proposals have been put forward – with varying success, observers say – in California, Connecticut, Hawaii, Illinois, Maryland, New York and Washington. Other states may follow.

Legislation includes possible wealth taxes, stronger estate taxes and taxing income from realized and unrealized capital gains. Proposals run from a general tax on net assets of more than $1 billion USD to a capital gains surcharge and double-digit taxes on individuals with state taxable income exceeding $1 million. Lawmakers want to tax stocks, bonds and other assets that can appreciate in value yet currently do not trigger a tax payment until sold; New York’s proposal, for instance, could produce almost a 30% tax on the capital gain income of rich New York City residents.

In California, a state representative has claimed that a wealth tax would raise $22 billion in revenue. Washington state – home to dozens of billionaires such as Microsoft co-founder Bill Gates – could raise about $3 billion annually through a proposed 1% tax on financial assets (the first $250 million of assets would be exempt).

The Arguments

Nationally, 30% of wealth ($39 trillion in 2022) is held by the 0.25% of households with total wealth over $30 million and white, non-Hispanic families hold 86% of America’s wealth. The wealthiest 1% of Americans have seen their fortunes grow 19 times faster than the bottom half of the population during the last decade, according to anti-poverty and other groups, in part because the U.S. taxes capital gains more favorably than it does income. Proponents say that taxing wealth could fund social programs, combat inequality and advance racial justice.
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