Policymakers often misread the math behind a 1% wealth tax. The post explains that, using a 5% risk‑free return, a wealth tax of that size equals an 20% income tax. The conversion hinges on dividing the tax rate by the capital return in any fiscal plan, this simple ratio helps gauge overall burden.

The article walks through a $100 capital example. With a 5% return, a 20% income tax cuts the $5 gain to $4, leaving $104 after one year. Switching to a 1% wealth tax yields the same $104, illustrating the equivalence the author stresses in plain arithmetic for policymakers debating redistributive measures in depth and impact.

The piece highlights that U.S. states rarely consider a 1% wealth tax because it would mirror a 20% jump in income taxes, pushing rates beyond Denmark’s 60.5% ceiling. It cites Oklahoma’s 4.75% state rate, showing that an added 20% would raise a median state’s marginal rate to 61.75%, a steep climb for residents worldwide today.

By framing the equivalence in simple terms, the author argues that lawmakers should grasp the true weight of a wealth tax before proposing it. The calculation also extends to capital gains, since the same logic applies when taxes hit an asset annually or only once. The takeaway: ignorance breeds unintended tax hikes for all.