> There are also practical problems with taxing wealth. [...] With a wealth tax, you might not have the money. For example, if you own an investment apartment or some other illiquid asset you can't just sell a piece of it every year to pay the tax.
This is a strawman trotted out against wealth taxes.
Stated another way: no, people shouldn't be able to put their wealth into an arbitrary form to make it untaxable.
After that, it's standard planning. Owe an unexpected amount of tax on a high performing asset you don't want to liquidate? Take a loan with it/gains as collateral. (The same as people do now!)
The bigger issue is valuation of illiquid assets. I.e. how to properly tax someone benefiting from opaque trusts or with shares of non-public assets (which they might be inclined to hide the profitability of).
"Take a loan with it" - that's not a practical solution if the asset is property. Getting a mortgage approved is far from straightforward, can take months, is by no means guaranteed to be accepted, and can be extremely expensive if done frequently (e.g. yearly) due to one-off costs and lock-in periods.
I'm not sure what country you live in, but in the US at least, mortgages (and their property-collateral loan relatives) are incredibly easy to get, relatively cheap, and come in a (perhaps overly so) incredible range of flavors.
This is a strawman trotted out against wealth taxes.
Stated another way: no, people shouldn't be able to put their wealth into an arbitrary form to make it untaxable.
After that, it's standard planning. Owe an unexpected amount of tax on a high performing asset you don't want to liquidate? Take a loan with it/gains as collateral. (The same as people do now!)
The bigger issue is valuation of illiquid assets. I.e. how to properly tax someone benefiting from opaque trusts or with shares of non-public assets (which they might be inclined to hide the profitability of).