Taxing for the amount they make is not wealth tax, that's income tax which already exists. The point you made, about where the incentive is and not killing the incentive to make money; is the exact point FOR wealth tax.
Let me explain.
If somebody works hard to make more money and you tax his fruit (income) then you reduce his incentive to make money. Wealth tax is a tax imposed upon the wealth he already owns, including estates, historical stock/dividend holdings etc. Say a rich boy, Casper, inherited his money from his dad. He might be working hard to increase the wealth or he might be sitting idly, doesn’t matter. If you tax this amassed wealth, you aren’t really reducing the incentive to work harder…not as much, anyway, as you would if you were taxing his income.
There are risks to it ofcourse, though not exactly the one you mentioned. People will start hiding more wealth in offshore secret accounts. Countries which do not impose the wealth tax would attract the deposit of such wealth from these rich folks. This could have adverse effect on a Nation’s economy. So these things need to be weighed in before any tax hike of such nature is implemented.
Focus should be on doing it efficiently than collecting it more. Finetune your outbox than enlarging your inbox. I support a temporary wealth tax, but its long term effect might be detrimental…unless this goes along with reduction of income tax.
