Methodology
How We Calculate
Full transparency on our calculation methodology, data sources, and assumptions. Our goal is to provide rigorous, reproducible analysis of wealth tax scenarios.
Calculation Engine
Four Scenarios Compared
Scenario A: Estate Tax Only
Current system (status quo). Estate/inheritance tax paid only at death. No annual wealth tax. This is the baseline for comparison.
Scenario B: Zucman 2%
2% annual wealth tax plus estate tax at death. This creates double taxation - paying annually AND at death.
Scenario C: Mellani Proposal
Pay annually, receive dollar-for-dollar credit against estate tax. No double taxation - annual payments reduce final estate tax liability.
Scenario D: Annualized Estate Tax
Theoretical reference: the annual rate that gives government the same NPV as waiting for estate tax. Shows the "fair" equivalent rate.
Annualized Estate Tax Calculation (Scenario D)
What annual rate would give the government the same present value as waiting for estate tax?
We use binary search to find the NPV-equivalent annual rate:
- Calculate NPV of estate tax under current system (Scenario A)
- Search for annual rate where NPV(annual taxes) = NPV(estate tax)
- Precision: 0.01% (searches between 0% and 10%)
- Result: The "fair" rate that replaces estate tax with equivalent value
Key Insight: If this fair rate is close to 2%, then Zucman's proposal is roughly fair as a replacement. But Zucman proposes 2% in addition to estate tax - that's the double taxation problem.
Year-by-Year Modeling
Each scenario is modeled year-by-year, tracking:
- Opening wealth balance
- Growth/return for the year
- Annual tax payment (if applicable)
- Closing wealth balance
- Cumulative taxes paid
Monte Carlo Simulation
Monte Carlo Analysis
Real returns are uncertain. Our Monte Carlo simulation runs thousands of scenarios with randomized returns based on historical market data.
Simulation Count
- Standard: 1,000 runs
- High: 5,000 runs
- Precision: 10,000 runs
Historical Data
Return distributions based on 1950-2024 market data, including regime changes (bull/bear markets).
Output Metrics
- Percentile distributions (P10-P90)
- Median outcomes
- Depletion risk probability
Default Assumptions
| Parameter | Default Value | Rationale |
|---|---|---|
| Growth Rate | 7% | Historical billionaire wealth growth |
| Discount Rate | 3% | Risk-free rate approximation |
| Planning Effectiveness | 35% | Estimated estate tax reduction through legal planning |
| Annual Tax Rate | 2% | Zucman's proposed rate |
| Time Horizon | 20 years | Typical planning horizon for UHNW individuals |
| Inflation Rate | 2.5% | For exemption indexing (Pro mode) |
All parameters are adjustable in the calculator. We encourage users to test sensitivity to different assumptions.
Jurisdiction Data
United States
- Rate: 40% federal
- Exemption: $15M (2026, OBBBA)
- Note: Permanent, inflation-indexed
United Kingdom
- Rate: 40%
- Exemption: £325,000
- Note: Reduced rate for charitable giving
France
- Rate: Progressive to 45%
- Exemption: €100,000 (direct line)
- Note: Higher rates for non-relatives
Limitations
Important Caveats
- State/Provincial Taxes: Our calculations do not include state or provincial level estate taxes, which can add 0-16%.
- Simplified Planning: Estate planning effectiveness is modeled as a single reduction percentage. Real planning is more complex.
- Inflation Adjustment: In Pro mode, exemptions are inflation-indexed annually. Simple mode shows nominal values.
- Static Tax Rates: We assume tax rates remain constant. In reality, they change over time.
- No Consumption: We assume wealth grows without withdrawals. Real estates involve spending.
- Single Jurisdiction: Many billionaires have assets across multiple jurisdictions.
Data Sources
Global Wealth Intelligence (GWI)
Real-time billionaire wealth tracking aggregating data from Forbes, Bloomberg, and market sources. Powers our wealth distribution analysis and Monte Carlo simulations.
Developed by Home Office OS LLC
Tax Authority Data
Estate tax rates, exemptions, and rules sourced from official tax authorities (IRS, HMRC, DGFiP) and the OECD Tax Database.
- Historical returns: S&P 500 (1950-2024), MSCI World indices
- Wealth data: Forbes Billionaires List, EU Tax Observatory
- Planning effectiveness: Academic studies on estate tax avoidance
- Monte Carlo engine: Adapted from Home Office OS financial planning tools