A wealth tax is charged on a person’s net wealth rather than on income or spending.
Net wealth generally means the value of assets minus liabilities. Depending on the law, taxable assets may include financial investments, bank deposits, real estate, business interests, and valuable personal property. Exemptions and thresholds are often used to limit the tax to people above a specified wealth level.
A wealth tax is different from income tax, which applies to flows such as wages or interest earned during a period. It also differs from property tax, which commonly applies to particular real estate or other property regardless of a person’s total balance sheet.
Several countries have adopted, repealed, or redesigned wealth taxes over time. Valuation difficulties, administration, asset mobility, and questions about liquidity are recurring issues. A person may own valuable assets without receiving enough cash income to pay a recurring tax, making design especially important.