My parents are going through updating their will. They have a collector car. It might be worth $50K, probably worth $70K, maybe worth $90K. They have a house. Might be worth $350K, probably $450K, maybe $500K.

Provided their estate will not hit the federal exemption (it will clearly not) or state exemption amount (ditto), there is nothing to compel them to prepare a balance sheet with fair market values.

But how do you make a wealth tax fair if there is no need to prepare a reasonably accurate balance sheet? If it's a yearly tax the loopholes allowed without an accurate balance sheet are so extraordinary that it's reasonable to assume they will cause more problems than the tax fixes.

(I'm agreeing with you, by the way.) My response above was addressing/objecting to a claim that accurate balance sheets are already being prepared upon death. There are huge practical issues with valuing illiquid assets.

Much wealth, though is held in relatively liquid assets or in illiquid assets with valuation processes already established in a lot of cases (real estate valuation for property tax assessment as an example). You won't be able to get perfect values on artwork, collector cars, and other one-of-kind collectibles.

That doesn't make a wealth tax entirely unworkable, though, in my estimation.

I think if a loophole exists for a collectible asset class wealth will accumulate there as part of tax planning. This can easily lead to bubbles and unfairness through asymmetric tax avoidance. I think it does pose deep foundational challenges for a wealth tax. Tracking income is far easier and many of the most common abuses defer tax rather than permanently avoid it. Under reporting of a hard to track quantity would result in less taxes permanently in the new system and measures to avoid it would represent a new level of reporting to government that many would find deeply invasive. Given all these flaws are the benefits large enough?

Not once per year. The ongoing balance sheet is highly problematic. Any assets that don't need to be updated would represent giant loopholes and potentially areas where bubbles would be inflated as capital moves into assets that grow whose growth isn't adequately accounted for.