Assessing the impact of a tax on household wealth in Ireland

This paper updates and extends the Irish microsimulation evidence on household wealth taxation using the 2023 Household Finance and Consumption Survey. We first document how the level, distribution and composition of household wealth have changed over the past decade. We then simulate a range of hypothetical annual net wealth tax scenarios that vary the breadth of the taxable asset base, through the inclusion or exclusion of particular asset types, and the thresholds above which liability begins. We find that asset coverage matters more for revenue potential than the threshold at which liability begins, while thresholds primarily determine the number of households liable. Very high thresholds can restrict liability to a small share of wealthier households, but only generate material revenue when combined with a broad asset base. Conversely, the largest aggregate tax liability estimates arise in scenarios that extend liability into a much broader proportion of households. Finally, hypothetical wealth tax payment-to-income ratios indicate that potential liquidity constraints are not limited to scenarios that extend liability to a broader share of households, but predominantly arise among some of the wealthiest households whose taxable wealth is large relative to their current income.