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Protestors march across the Brooklyn Bridge holding a sign reading, "Tax the rich," on March 5, 2021 in New York City.
(Photo by David Dee Delgado/Getty Images)
Report Offers Easy Path for States to Make Tax Code Fairer by Targeting the Rich
"For too long, our tax systems have favored wealth over work," said the report's co-author. "State wealth proceeds taxes would take a major step toward correcting that imbalance.”
Oct 31, 2025
Taxing the passive proceeds of extreme wealth—including capital gains and stock dividends—is an easy way for states to generate billions of dollars in revenue, reduce inequality, and boost fairness in tax systems, according to a report published Thursday.
The Institute on Taxation and Economic Policy (ITEP) report shows how state-level wealth proceeds taxes of just 4% on profits generated by means including capital gains, dividends, and passive business income could raise more than $45 billion a year in revenue nationwide, while an enhanced version of such a levy would generate $57 billion annually.
According to the report, approximately three-quarters of such revenue would come from households with annual incomes exceeding $1 million—and only 4.4% of US taxpayers would owe anything at all.
Wealth inequality gets worse when working households pay more in taxes than wealthy owners.States have a simple way to address this problem and raise much-needed revenue.It's well past time for a Wealth Proceeds Tax.
[image or embed]
— ITEP (@itep.org) October 30, 2025 at 10:44 AM
Other key findings of the report include:
- A state wealth proceeds tax would help correct an imbalance in which most of the income generated by passive wealth currently faces effective federal tax rates roughly 40% lower than wages and salaries;
- A wealth proceeds tax is easy to implement—states can piggyback on federal filings, minimizing administrative costs for both taxpayers and state revenue agencies; and
- For a successful example of a wealth proceeds tax, look to Minnesota.
In 2023, Minnesota became the first state to enact a law piggybacking a wealth proceeds tax on the federal net investment income tax (NIIT), a levy on certain earnings from high-income individuals, estates, and trusts. Minnesota's 1% tax only applies to such wealth exceeding $1 million and is expected to raise more than $60 million in revenue in 2026.
Other states, while not having a wealth proceeds tax, apply higher levies on certain types of proceeds. Massachusetts, for example, imposes a short-term capital gains that is 3.5% higher than the ordinary state income tax rate, while Maryland enacted a 2% levy on short- and long-term capital gains for households earning more than $350,000 annually.
“States have an untapped opportunity to tax extremely wealthy families," ITEP senior analyst and report co-author Sarah Austin said in a statement. “The federal government already defines what counts as wealth-derived income, so states can easily adapt that framework to make their tax codes fairer and more robust.”
The report's other author, ITEP research director Carl Davis, said: "For too long, our tax systems have favored wealth over work. State wealth proceeds taxes would take a major step toward correcting that imbalance.”
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This country and this world are at a monumental crossroads. US voters have an opportunity to beat back the forces of fascism and confront the billionaires who are rigging the economy, our media system, and our democracy, making it increasingly impossible for ordinary people to get by. We’re not just talking about the election. We’re talking about what must be done once these fascist elements are vanquished from power. We need a bolder set of solutions than what either major party has so far been willing to offer and a working-class movement ready to fight like hell for it. Trump didn't emerge from nowhere. The conditions that fueled MAGA authoritarianism were created by decades of radical neoliberal economic policies and a corrupt political system dominated by corporate interests. They slashed taxes on the super-rich, promising that the benefits would trickle down. They said giveaways to the corporate titans would make life more affordable for the rest of us. It was all bullshit. And when a bitter, betrayed populace searches for someone to blame, right-wing demagogues have little trouble finding scapegoats. People know when they're being lied to, but you won't hear any of this from the corporate media. Only independent journalism—powered and funded by people who believe in building a better world—can deliver truly trustworthy daily news. If you share our vision, please contribute whatever you can to sustain our work. |
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Taxing the passive proceeds of extreme wealth—including capital gains and stock dividends—is an easy way for states to generate billions of dollars in revenue, reduce inequality, and boost fairness in tax systems, according to a report published Thursday.
The Institute on Taxation and Economic Policy (ITEP) report shows how state-level wealth proceeds taxes of just 4% on profits generated by means including capital gains, dividends, and passive business income could raise more than $45 billion a year in revenue nationwide, while an enhanced version of such a levy would generate $57 billion annually.
According to the report, approximately three-quarters of such revenue would come from households with annual incomes exceeding $1 million—and only 4.4% of US taxpayers would owe anything at all.
Wealth inequality gets worse when working households pay more in taxes than wealthy owners.States have a simple way to address this problem and raise much-needed revenue.It's well past time for a Wealth Proceeds Tax.
[image or embed]
— ITEP (@itep.org) October 30, 2025 at 10:44 AM
Other key findings of the report include:
- A state wealth proceeds tax would help correct an imbalance in which most of the income generated by passive wealth currently faces effective federal tax rates roughly 40% lower than wages and salaries;
- A wealth proceeds tax is easy to implement—states can piggyback on federal filings, minimizing administrative costs for both taxpayers and state revenue agencies; and
- For a successful example of a wealth proceeds tax, look to Minnesota.
In 2023, Minnesota became the first state to enact a law piggybacking a wealth proceeds tax on the federal net investment income tax (NIIT), a levy on certain earnings from high-income individuals, estates, and trusts. Minnesota's 1% tax only applies to such wealth exceeding $1 million and is expected to raise more than $60 million in revenue in 2026.
Other states, while not having a wealth proceeds tax, apply higher levies on certain types of proceeds. Massachusetts, for example, imposes a short-term capital gains that is 3.5% higher than the ordinary state income tax rate, while Maryland enacted a 2% levy on short- and long-term capital gains for households earning more than $350,000 annually.
“States have an untapped opportunity to tax extremely wealthy families," ITEP senior analyst and report co-author Sarah Austin said in a statement. “The federal government already defines what counts as wealth-derived income, so states can easily adapt that framework to make their tax codes fairer and more robust.”
The report's other author, ITEP research director Carl Davis, said: "For too long, our tax systems have favored wealth over work. State wealth proceeds taxes would take a major step toward correcting that imbalance.”
From Your Site Articles
Taxing the passive proceeds of extreme wealth—including capital gains and stock dividends—is an easy way for states to generate billions of dollars in revenue, reduce inequality, and boost fairness in tax systems, according to a report published Thursday.
The Institute on Taxation and Economic Policy (ITEP) report shows how state-level wealth proceeds taxes of just 4% on profits generated by means including capital gains, dividends, and passive business income could raise more than $45 billion a year in revenue nationwide, while an enhanced version of such a levy would generate $57 billion annually.
According to the report, approximately three-quarters of such revenue would come from households with annual incomes exceeding $1 million—and only 4.4% of US taxpayers would owe anything at all.
Wealth inequality gets worse when working households pay more in taxes than wealthy owners.States have a simple way to address this problem and raise much-needed revenue.It's well past time for a Wealth Proceeds Tax.
[image or embed]
— ITEP (@itep.org) October 30, 2025 at 10:44 AM
Other key findings of the report include:
- A state wealth proceeds tax would help correct an imbalance in which most of the income generated by passive wealth currently faces effective federal tax rates roughly 40% lower than wages and salaries;
- A wealth proceeds tax is easy to implement—states can piggyback on federal filings, minimizing administrative costs for both taxpayers and state revenue agencies; and
- For a successful example of a wealth proceeds tax, look to Minnesota.
In 2023, Minnesota became the first state to enact a law piggybacking a wealth proceeds tax on the federal net investment income tax (NIIT), a levy on certain earnings from high-income individuals, estates, and trusts. Minnesota's 1% tax only applies to such wealth exceeding $1 million and is expected to raise more than $60 million in revenue in 2026.
Other states, while not having a wealth proceeds tax, apply higher levies on certain types of proceeds. Massachusetts, for example, imposes a short-term capital gains that is 3.5% higher than the ordinary state income tax rate, while Maryland enacted a 2% levy on short- and long-term capital gains for households earning more than $350,000 annually.
“States have an untapped opportunity to tax extremely wealthy families," ITEP senior analyst and report co-author Sarah Austin said in a statement. “The federal government already defines what counts as wealth-derived income, so states can easily adapt that framework to make their tax codes fairer and more robust.”
The report's other author, ITEP research director Carl Davis, said: "For too long, our tax systems have favored wealth over work. State wealth proceeds taxes would take a major step toward correcting that imbalance.”
From Your Site Articles
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