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%.
Financial support from Marianne and Marcus Wallenberg Foundation (grant number 2019.0117), Jan Wallanders och Tom Hedelius stiftelse samt Tore Browaldhs stiftelse (grant numbers W19‐0021 and P19‐0117), and Vinnova (grant number 2022‐00258) is gratefully acknowledged.