Updates: State-Level Efforts to Tax the Wealthy

States’ efforts to tax wealthy residents have accelerated since 2020—as has thought leadership about the structure and effects of these taxes. Items follow on (1) piggyback taxes on § 1411’s net investment income tax (NIIT) and (2) Illinois lawmakers’ (unsuccessful) efforts to revive a mark-to-market tax on billionaires.

Sarah Austin & Carl Davis, The Wealth Proceeds Tax: A Simple Way for States to Tax the Wealthy, Inst. Tax’n & Econ. Pol’y (Oct. 30, 2025):

The federal NIIT is a general fund revenue source that was enacted both to offset some of the cost of expanding access to health care and to advance parity in the taxation of wealth and work. States can create their own Wealth Proceeds Taxes, piggybacking on the federal NIIT, to fund their priorities and diversify their revenue streams to include more deliberate taxation of the wealthy. . . .

Minnesota became the first state to enact a law piggybacking on the federal NIIT in 2023. Minnesota’s levy assesses a 1 percent tax and applies only to the portion of wealth proceeds that exceed $1 million. . . .

[The Minnesota levy] does make a handful of adjustments to the federal NIIT base and, even so, its statute clocks in at just 223 words long. The relevant Minnesota tax form also fits onto a single page.

Jared Walczak, llinois Lawmakers Are Attempting to Rush Through a Harmful Tax on Unrealized Gains in 48 Hours, Tax Foundation (Oct. 29, 2025):

Under a proposal called the Extremely High Wealth Mark-to-Market Tax Act, Illinois would impose a 4.95 percent tax on the unrealized gains of all assets, tangible and intangible, of billionaires. . . .

Illinois lawmakers propose to address the liquidity issue by allowing each year’s assessment to be paid over 10 years, albeit with a 7.5 percent penalty. This doesn’t even come close to solving the problems created by the tax. . . .

It is astonishing that Illinois lawmakers are taking up such a proposal on the clock, trying to rush it through [unsuccessfully] before the current veto session ends . . . .

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