Warren Gorlick is a retired policy adviser at the Treasury Department and attorney at the Commodity Futures Trading Commission.
The United States faces a $40 trillion debt crisis that is pushing up interest rates on mortgages and auto loans, inflating the cost of borrowing and threatening job growth.
That means the federal government needs to raise revenue, and the left has a solution: Tax the wealthy directly through an annual levy on net worth. Sen. Elizabeth Warren (D-Massachusetts) has proposed a 2 percent tax on net worth above $50 million and 3 percent above $1 billion. Sen. Bernie Sanders (I-Vermont) and Rep. Ro Khanna (D-California) have proposed a flat 5 percent tax on billionaires. But the tax rates on the table are set so high that they could cause capital to flee.
There’s a middle path that already exists: Switzerland has taxed personal wealth annually for more than a century — at much lower rates than those Warren and Sanders have proposed — without hollowing out the country’s economy or driving away its wealthiest residents.
A wealth tax isn’t as radical as it sounds. America already has a narrow version: the property tax. Homeowners pay annually based on what their house is worth, whether or not the house produces income. But the tax applies to only one asset class. A family with a $1 million house and little else pays taxes on nearly all its wealth every year. A family with the same house plus tens of millions in equity pays taxes on only a sliver of its actual net worth. Property taxes aren’t going to go away, but they could be expanded, at a modest rate, to cover the financial wealth that currently escapes taxation.
The trouble with Warren’s and Sanders’s proposals is that an annual tax on wealth is fundamentally different from an income tax. A person earning $1 million annually can pay a 5 percent tax out of that year’s income. A person who owns $1 billion in stock doesn’t necessarily receive $50 million in cash in a given year. If the IRS demands 5 percent of a person’s net worth annually, the taxpayer may have to sell assets to cover the bill. That creates an incentive to relocate assets outside the U.S. Few people will muster much sympathy for a billionaire’s tax problem, but a wealth tax that assumes capital can be taxed indefinitely at a high rate is a wealth tax that ultimately won’t be paid, because the wealth — or its owner — will simply be gone.
Switzerland offers a better design. Swiss cantons — the country’s member states — have levied annual taxes on individual net wealth for more than a century. The system is decentralized, and some cantons tax more heavily than others. Zurich, Switzerland’s most populated canton, sits toward the higher end, yet its rates remain modest compared with the proposals being floated in Washington. A married couple with “just” $2.5 million in net worth pays an effective rate of roughly 0.24 percent, or about $6,000 per year. Even billionaires don’t pay much more proportionally: Zurich’s combined cantonal-and-municipal wealth tax tops out around 0.7 percent, or $7 million, on a $1 billion fortune.
Despite the tax, Switzerland is one of the world’s wealthiest countries. In 2024, more than 1 in 7 Swiss adults had a net worth of at least $1 million. The number of adults with between $5 million and $10 million in assets grew 7.4 percent annually from 2000 to 2025.
Applied to the U.S., the same logic suggests that a federal wealth tax of roughly 0.5 percent on a broad collection of assets — stocks, bonds, private businesses, investment funds and real estate — imposed on the wealthiest Americans would not result in a flight of citizens and their capital. Household net worth in the U.S. totals roughly $186 trillion, according to Federal Reserve data. Even a tax that applies only to the top 1 percent of U.S. households, which hold approximately $60 trillion, could easily raise $200 billion per year. A maximum wealth tax rate of 0.5 percent would require a U.S. taxpayer with $1 billion in assets to pay $5 million annually. While substantial, this is unlikely to encourage someone to uproot their life and move to a foreign country to escape the tax.
Republicans, not just Democrats, should be willing to push for a Swiss-style wealth tax. A party that wants to preserve entitlement funding, raise defense spending and control deficits needs new revenue from somewhere. A modest wealth tax raises a significant amount of money without having to further raise the income tax. It is a rare fiscal idea that both a deficit-hawk Republican and a revenue-hungry Democrat could accept.
A modest wealth tax won’t, by itself, solve America’s $2 trillion annual deficit. But it would be a meaningful down payment toward addressing America’s fiscal imbalance — one that both sides could get behind.
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