Which of the following is an example of a wealth tax?

• A. A tax on profits earned by corporations
• B. A sales tax applied to consumer purchases
• C. A tax on the value of real estate owned by individuals
• D. An income tax levied on annual earnings

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of a wealth tax. A wealth tax is a tax imposed on the total value of personal assets owned by an individual, such as real estate, stocks, or other property, rather than on income or transactions.
2. Step 2: Review each option and identify what is being taxed. For example, a tax on profits earned by corporations targets corporate income, not personal wealth.
3. Step 3: Recognize that a sales tax applied to consumer purchases is a tax on transactions, specifically on the purchase of goods and services, not on accumulated wealth.
4. Step 4: Note that an income tax levied on annual earnings is a tax on the flow of income over a period, not on the stock of wealth owned at a point in time.
5. Step 5: Conclude that the tax on the value of real estate owned by individuals fits the definition of a wealth tax because it is based on the value of an asset owned, representing accumulated wealth.