To Örebro University

Wealth-tax rates are formulated as fractions of a capital stock, rather than fractions of income from capital, which makes them difficult to compare with other (income-based) tax rates. We derive investor-utility comparisons between wealth-tax rates and realized capital-gains tax rates, capturing two crucial features absent in naive comparisons: Risk-aversion and investment horizon, both of which magnify the effect of wealth taxes vis- & agrave;-vis capital-gains taxes. In numerical calibrations, we show that whereas a 1-percent wealth tax might naively be judged equivalent to a 10% capital-gains tax, a more accurate figure for a long-run risk-averse investor is 25%.