Tax Notes Talk Sharing the Wealth? Exploring a State Wealth Tax
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Sep 19, 2025 In this discussion, tax experts David Gamage, a law professor researching taxation, and Darien Shanske, a professor specializing in state tax policy, delve into their recent research on state-level wealth taxes. They outline how these taxes could effectively target intangible wealth and address inequities in current tax systems. The conversation covers historical context, constitutional challenges, and design considerations necessary for implementation. They also explore the political landscape around such reforms and why a state wealth tax may be the solution for greater fairness.
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States As Tax Policy Laboratories
- State-level wealth taxes differ politically and constitutionally from federal taxes and can serve as policy laboratories for tax innovation.
- David Gamage says states can tailor progressive taxation to local preferences without waiting for federal action.
Income Tax Fails On Extreme Intangibles
- Intangible financial wealth has grown and existing income taxes poorly capture extreme wealth from appreciation and nonrealized gains.
- Gamage argues that rising intangible wealth reduces the effectiveness of current state and federal income taxes.
Top-End Progressivity Breaks Down
- Even progressive states like California become less progressive at the top because realization rules let wealthy owners avoid tax on appreciation.
- Darien Shanske and David Gamage highlight the buy-borrow-die dynamic that undermines state progressivity.