An annual tax on wealth could be called theft by instalments
A transaction tax such as VAT, stamp duty, or income tax on a flow of earnings, taxes an event; something happens, value changes hands, and the state takes a cut of that specific event. However objectionable the rate, the tax is triggered by, and proportionate to, an act of exchange or acquisition. You are taxed on what you do.
A wealth tax is different in kind, not just degree. It taxes a stock, not a flow, the mere continued existence of assets you already own and on which, typically, tax has already been paid at acquisition. This might have been income tax on the earnings that bought the house, capital gains tax when the asset was sold to you, or inheritance tax if it came that way. Because wealth does not disappear once taxed, an annual wealth tax is not a one-off claim, it's a recurring claim on the same pool of capital, year after year, whether or not you have done anything at all in the interim.
The libertarian argument is that this converts taxation from ‘the state takes a share of what you generate’ into ‘the state takes a share of what you are,’ and since you cannot generate infinite income from an asset to keep paying a tax on the asset itself indefinitely, sustained wealth taxation is mathematically a gradual claim on the principal. Nozick-influenced critics put it exactly this way ‘an income tax says that we own part of what you make,’ but a wealth tax says ‘we own part of you, delivered in yearly tranches,’ hence ‘theft by instalments.’ It represents the difference between a toll, and a rent extracted for permission to continue possessing what is already yours.
There is a supporting practical argument too. Wealth taxes force liquidation of illiquid assets, such as family businesses, land, or farms, to pay a tax bill with no corresponding transaction generating cash. This is precisely the salami-slicing quality that gives the ‘theft by instalments’ framing its bite. Even at a modest 1-2% rate, compounded over decades against real returns that may themselves be modest, a wealth tax can consume a large fraction of an estate's real value over a lifetime, something no single transaction tax does.
It could be argued that all taxation, on this line of reasoning, is ‘theft’ in the Nozickian sense, and that wealth taxes are not distinctive, just more visible about it. One could also argue that property rights themselves are partly constituted by the state, through courts, land registries, protection and enforcement. Wealth could be called unrealised gain in value that the state's institutions helped create and protect. This means that an ongoing charge for that protection is not obviously different in principle from ongoing council tax or business rates, both of which are also ‘theft by instalments’ if you accept the framing.
Income and consumption taxes have their own repeated, non-transactional creep, caused by inflation-driven fiscal drag and frozen thresholds, so the flow/stock distinction may be less clean than it looks.
Some economists, including some from a broadly liberal tradition, argue that an annual property or land-value tax is more efficient and less distortive than transaction taxes precisely because it does not penalise moving house or trading assets. Stamp duty, for instance, is often criticized on market-liberal grounds for freezing efficient reallocation.
That wealth taxes are ‘theft by instalments’ is a coherent and often-made argument within a broadly Nozickian frame, with genuine bite against annual wealth taxes on illiquid, already-taxed capital, but it rests on premises about the moral status of taxation and property. The view might be that all taxes are bad, but that some taxes are necessary, and that some taxes lean closer toward outright confiscation than others.
On this basis, the aim should be to have taxation as low as possible, and to cut the spending that buys votes but impoverishes those who earn and those who save. People should not be taxed on what they have saved. And the tax on earnings should fund only what is necessary.
Madsen Pirie