How to Measure and Value Wealth for a Federal Wealth Tax Reform

This report explains the best approaches for valuing the most important categories of taxpayers’ wealth for implementing a wealth tax reform. As this report will explain, although there are many difficulties involved in designing a valuation and measurement system, these difficulties are not inherently more challenging when it comes to designing and implementing a wealth tax than they are for designing and implementing an income tax. This report explains how a wealth tax could use a combination of formulaic valuations and appraisals to arrive at sufficiently accurate valuations so as to minimize the opportunity for tax avoidance through undervaluation. Although this approach involves some complexities and imperfections, and will require increased IRS funding and other enforcement resources, these costs are relatively small compared to the revenue and equity considerations at stake. Through a combination of increased IRS funding and enforcement resources and a practical mix of formulaic valuations and appraisals, a wealth tax could be designed so as to raise substantial revenues from the very wealthy and restore equity to our tax system.