What's wrong with taxing assets (wealth)? I don't know the full economic implications, but I think it may be more fair than taxing income. Wealth is a much better measure of a person's financial strength. Consider:
* Because we tax income, a person with $1 billion in assets who makes $100,000 pays less tax than a person with $0 assets and makes $150,000.
* Because we tax income, a person who loses all their assets in the housing collapse but earns $100,000 pays more tax than the person whose assets appreciate $1 million but earns only $50,000 in income.
* If we tax wealth, future taxes are much more predictable, enabling more efficient long-term investment and planning. I could make a pretty good guess about what my tax bill will be next year, 5 years from now, etc. The billionaire can make much longer-term projections.
As a rough estimate of the wealth tax rate: One estimate of total wealth in the US is $80 trillion and the federal government takes in ~$3 trillion in revenue. By those numbers, the wealth tax rate would be 3.75% for the average American, if all that revenue were replaced by a wealth tax.