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Wealth Taxes

Sigma Investment Counselors

June 30, 2021

As the Biden administration considers options to fund proposed spending, the possibility of a wealth tax continues to surface.  While there are no specifics, or bills in Congress, at this time, investors may want to consider some of the potential consequences, intended and/or unintended.

It should be recognized that the idea of a wealth tax is far from a done deal and is likely to be hard to implement.  After many years of participation in estate tax valuation negotiations early in my career, one thing stands out – a final resolution can take years for a large, complex estate.  To think that the IRS can do this every year, boggles the mind.

Taxing wealth is going to be further complicated by the wide range of assets involved, particularly the issue of liquidity.  How do you generate cash if the primary asset is non-income producing and illiquid?  Sell a minority interest to raise cash?  To whom?  Every year?

Investors might also want to consider how markets will respond to a pattern of forced sales over a number of years.  Will this affect valuations for certain assets and/or generally?

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA®

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