Liquidity issues: Solutions for the asset-rich-cash-poor

Glen Loutzenhiser and Elizabeth Mann

Wealth and Policy, Working Paper 110

30 Oct 2020

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This paper considers liquidity issues under a wealth tax. The imposition of a tax on the stock of wealth can lead to difficulties for the ‘asset-rich-cash-poor’, if the assets upon which the tax is levied do not generate sufficient income and cannot be easily turned into cash, or where it is difficult or undesirable to dispose of the assets in order to pay the tax. The paper begins with a quantitative analysis of the scale of these problems. Next, we turn to the main administrative concerns, focusing on taxpayers who we identify as having potentially low liquidity based on our analysis and the existing literature. Finally, we consider a range of possible solutions to manage these concerns.

DOI: 10.47445/110
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