A wealth tax is applied to real assets (such as land, buildings, and other fixed property), as well as bank accounts and other financial assets (such as bonds, stocks, derivatives). This tax is due whether the owner is a citizen or non-citizen. The taxable value of these assets are set at the self-declared price its owners are willing to sell them for. The government may then buy those assets, for eminent-domain purposes or otherwise, at that price. In essence, having a free-market economy requires that all assets have a price at which its owner would sell. The advantage of such self-declaration is that the government does not force a price on an owner, and that it encourages the owner to value their assets accurately. Setting a value too low allows the government to purchase the asset and then resell at a profit. To further assure an accurate declaration of value, if an owner insures the property for a value greater than the one they state, then the insured value would be used for the purpose of tax calculation.
As with consumption, some wealth is necessary to function in our economy. A subsistence wealth level is set based on household size (although retirement and disability status could also be used). This recognizes the necessity of having a place to live, and enough finances to function. The wealth tax owed would be a percentage of self-declared value of wealth above the subsistence level. It would also possible to have progressive rates of wealth tax. Since there is an annual wealth tax based on ownership, an inheritance tax is unnecessary since whomever receives the inheritance would then be responsible for paying the wealth tax. The wealth tax being paid by the person who owns the tax would apply to both natural persons and to IBEs.
Other considerations might include: an exemption for a primary residence, an educational debt deduction (where the outstanding principal could be used to reduce value of financial assets to be taxed), or a retirement account deduction, where some, or all, of a retirement account (i.e. IRA, 401k, 403b, etc.) could be exempt from the wealth tax. Otherwise, value of assets are not reduced by amount of debt. Non-citizen owners of protected property would pay a wealth tax on the full declared value of the property.
Consider an example of a wealth tax in action. Real assets are taxed at a 1%/yr rate above subsistence level, financial assets are taxed at a .5%/yr rate above subsistence level. The subsistence level of real assets is set at $200,000 for a one-person household, and $50,000 for each additional person. The subsistence level of financial assets is $50,000 for a one-person household, and $25,000 for each additional person. In the case of a three person household that values their home at $500,000 and their financial assets at $200,000, the household would pay $2,500/yr, which equals .01*(500,000 – 300,000) + .005 *(200,000 – 100,000). In the case of a single person who rents and has $20,000 in financial assets, they would pay no tax. In the case of a household of four that value their real assets at $25,350,000 and their financial assets at $200,125,000, they would pay $1,250,000/yr .