I keep reading people fearful of a "wealth" tax, suggested in addition to the income tax.

The key idea is that those who are wealthy are not those who generally pay the highest income tax. Having a high income does not mean you are wealthy, and in most cases wealth cannot be taxed.

For example, two men earn $100,000 a year. Man A has no investments or anything other than his house, so his total wealth is $400,000. Man B has invests and total wealth of $1,200,000.

If both men pay 21% income tax, they are both paying $21,000 tax. But for man A, that is 4.2% of his total wealth (counting income as wealth). For man B, that tax represents only 1.6% of his total wealth.

Anyway, the idea is that the IRS wants to tax wealth. How would that even be possible? I don't understand the fear, as I can't see how it could possibly happen.

By far, the rich are already taxed more than the poor. In fact, one of the recent changes (thank you Mr. Bush, niaa Mr. Kary), is that anyone with income under $10,000 can get the earned income credit, even though they paid no taxes at all during the year! (This used to be a credit reserved for those with children.)

A wealth tax is just another way of taxing the rich, and the rich will always fight back. Actually, as long as Kary is running for office, he'll claim that the wealth tax actually hurts the poor whether it does or not.

First, the IRS has to define "wealth" and how it will be taxed. Next, the IRS has to define exemption from the wealth tax to avoid hurting poor people who only look rich on paper.

Example:

A widow in Spokane, Washington owns her home free and clear, and the property value is $300,000, and her only income is her social security check, not taxable.

A widow in Seattle, Washington owns her home free and clear, and the property value is $750,000 because of Californians moving in and property value going up uncontrolably. Her only income is her social security, not taxable, and equal to the woman in Spokane.

With a wealth tax, the woman in Seattle would not be able to live in her house and would be forced to move unless the IRS offers an exemption for low-income people.

This will be a difficult tax to iron out, obviously. If the IRS isn't careful, they might be forcing widows out of their homes.

(Incidently, the inheritance tax now has an exclusion well above $1 million, meaning, if you inherit less than that, you don't even have to report it. I would assume that a wealth tax would have to have similar limits, otherwise estates would once again be threatened.)