I Asked ChatGPT What Would Happen if We Taxed Wealth Instead of Income — Here’s What It Said
Written by
Jennifer Taylor
Edited by
Amen Oyiboke
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Wealth disparity in the U.S. remains striking. As of the fourth quarter of 2024, the top 10% of U.S. households had an average net worth of $8.1 million — holding 67.2% of total household wealth, according to the Federal Reserve Bank of St. Louis.
In comparison, the bottom 50% of households had an average net worth of just $60,000, representing only 2.5% of total household wealth.
Implementing a wealth tax is one widely discussed idea to help close this gap. GOBankingRates asked ChatGPT a series of questions about taxing wealth instead of income — here’s what it said.
Slowing the Wealth Gap With a Wealth Tax
“A well-designed wealth tax could help slow the wealth gap and give lower earners relief, but practical challenges make it difficult in the U.S. context,” the chatbot said.
Some of those challenges include annually valuing assets not tied to public markets, potential tax evasion and avoidance, constitutional barriers to “direct taxes” unless imposed by states, and political opposition.
“Even if a full wealth tax isn’t implemented, reforms targeting wealth — such as estate taxes, capital gains adjustments or billionaire minimum taxes — could achieve similar goals with fewer barriers,” ChatGPT added.
Tax Revenue From the Top vs. the Bottom
In 2022 — the most recent year with available data — the top 1% of taxpayers paid more in income taxes than the combined total of the bottom 90%, according to data the chatbot cited from the Tax Foundation. The top 1% paid $864 billion in income taxes, while the bottom 90% paid $599 billion.
The adjusted gross income of the top 1% was $3.3 trillion, according to the Tax Foundation. By comparison, the $599 billion paid by the bottom 90% represented just 18% of the upper tier’s wealth.
Further emphasizing the divide, the top 1% of American households owned 30 cents of every dollar as of 2023, according to data cited from USAFacts.
Possible Ways To Apply a Wealth Tax
It’s possible the U.S. could institute a wealth tax, but ChatGPT said it would be challenging. Some of the most conceivable ways to go about this include taxing unrealized gains, imposing billionaire minimum taxes, strengthening estate taxes or implementing wealth-adjusted surtaxes.
“These capture much of the benefit of a wealth tax, while sidestepping the hardest administrative problems,” said the chatbot.
Other Countries With a Wealth Tax
Many European countries have experimented with wealth taxes but later repealed them due to administrative difficulties, tax avoidance, limited revenue and political backlash, according to ChatGPT. These countries include France, Germany, Sweden, Denmark, Austria, Finland, Iceland, the Netherlands, Luxembourg and Ireland.
Instead, most wealthy nations tax the rich indirectly through property, inheritance and capital gains taxes. However, Norway, Spain and Switzerland still maintain some form of wealth tax.
Ways a Wealth Tax Could Backfire
While implementing wealth taxes might sound straightforward, the chatbot noted this can backfire without a carefully devised plan.
“A poorly designed wealth tax could push wealth offshore, distort investment decisions, bring in less money than promised and ultimately erode trust in the tax system,” ChatGPT said.
Consequently, experts commonly suggest using hybrid alternatives that can collect similar revenue, with less chance of backlash. Some of these include taxing unrealized capital gains for billionaires, strengthening estate taxes or imposing a billionaire minimum tax, said the chatbot.
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