A Proposed US Wealth Tax: How To Prepare

Tony McEahern and Bill Rudnick, January 23, 2020


Cresset, the US wealth management firm that has expanded rapidly in the past couple of years, explains what could and should be done to prepare clients if a wealth tax is enacted in the US.

This is a US presidential election year and that means readers can expect tax to rear its sometimes ugly head. From the leftward side of the political aisle come calls for a wealth tax, fueled by claims about widening wealth inequality. Whatever one thinks of such commentary, the threat of a wealth tax is real. More than a dozen European countries used to have wealth taxes. The vast majority have since scrapped them, including Austria, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, the Netherlands, Luxembourg, and Sweden (source: National Review, March 27, 2019). But the idea refuses to die, and it is worth remembering that Switzerland has a wealth tax, which might surprise people used to considering the Alpine state as a low-tax offshore center. In any event, Democrat senator, Elizabeth Warren, for example, is pushing for a wealth tax as part of her campaign for the presidential ticket. A decade on from the financial crash and a huge infusion of central bank new money, aka quantitative easing, there is still a lot of political pressure to ameliorate the distributional impact. 

To consider the threat of a wealth tax and what high net worth US citizens can do about it is Cresset, the US firm. They recently issued guidance, authored by Tony McEahern, senior managing director and head of wealth strategy for Cresset; and Bill Rudnick, senior partner and general counsel for Cresset. The item is republished with permission. As always, the editors of this news service don’t necessarily endorse all views of outside writers. To respond, email and

When contemplating how to address any tax to be imposed by government, it is often helpful to review a quote from Judge Learned Hand:

“Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.” Gregory v. Helvering, 69 F.2d 809, 810 (2d Cir., 1934)

This quote serves as a great reminder that proper tax planning is not something unusually nefarious, but rather a right we have to minimize government impact on our affairs. Governments have, do, and will continue to propose and implement taxes - all with varying degrees of consequences to those subject to them.

Recently, the concept of a “wealth tax” exploded on the domestic political scene. Several candidates for president have proposed a wealth tax in some form. But what exactly is a wealth tax, and why do some feel it is necessary? What follows is not a response to a partisan question. Instead, it is meant to help those who would be subject to such a tax to think about its potential impact and provide options to plan for its effect.

Worldwide, wealth taxes are not new. Many countries have had a wealth tax, and some have subsequently eliminated it (1). According to the Organization for Economic Cooperation and Development (OECD), as recently as 1990 more than a dozen countries (including Austria, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Spain, Sweden, and Switzerland) imposed a wealth tax. By 2017, only four (France, Norway, Spain, and Switzerland) still did so (1) .

Some of the European criticisms levied against wealth taxes include inefficiency and administrative challenges, failure to accomplish the redistributive objectives, and failure to collect revenue targets (1). Moreover, the report indicates that wealth taxes can be difficult to administer and challenging to enforce (1). The OECD notes that there are many reasons why most of Europe has eliminated the wealth tax. The more compelling justifications include: wealth taxes have a disappearing wealth base; since the tax is a net wealth tax, debt is deductible; when exemptions are made for certain types of assets, taxpayers incur debt to acquire such assets; and the determination of an asset’s value can be problematic, particularly for items such as real estate holdings and privately-held businesses (1).

A wealth tax differs from a traditional income tax in that it is a tax on the existing value of wealth – often referred to as net worth (net worth is the value of all assets minus outstanding debt.) What would be subject to a proposed wealth tax? In short, mostly everything: cash, real estate, investments, business holdings, trusts, personal property (cars, art, jewelry), etc.

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