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“It’s not a wealth tax, but a tax on unrealized capital gains of exceptionally wealthy individuals,” Treasury Secretary Janet Yellen was at pains to explain. The Treasury gig hasn’t been good for her reputation. But she certainly knows that a tax on unrealized capital gains is a de facto wealth tax, which would be levied on property rather than income.

For example, if Jeff Bezos’s Beverly Hills estate appreciates by 10% in a year, he could be taxed on its increase in value. Ditto for his Amazon stock holdings. Currently such assets are only taxed when they’re sold, which is when the income is realized.

Democrats claim the tax will only hit some 700 uber-rich Americans with more than $1 billion in assets or who have more than $100 million in income for three consecutive years. That’s what they always say.

The first income tax enacted after ratification of the Sixteenth Amendment in 1913 had seven tax brackets with rates from 1% on income over $3,000 ($83,972 in current dollars) to 7% on income exceeding $500,000 ($14 million). You know what rates are now. The alternative minimum tax also only applied initially to the richest Americans, but with time expanded to hit millions in the middle class.

Maybe the only impediment to extending the wealth tax more broadly is the challenge of administering it. Even House Ways and Means Chairman Richard Neal acknowledges it would be a logistical nightmare.

Details of Mr. Wyden’s plan haven’t been released, so it’s not clear if the tax would apply to non-financial assets like artwork, jewelry and intellectual property. If so, more Americans could get soaked since the IRS will no doubt inflate the value of non-financial assets, as it often does with the estates of high earners.

A tax court this year ruled that the late entertainer Michael Jackson’s “likeness and image” were worth about $157 million less than the IRS claimed. Will the Wyden plan tax Americans’ likeness and image? How about copyrights and patents? The IRS will have to hire many more auditors to assess the value of property, which will mean more tax litigation.

The Washington Post reports that a summary of the draft plan would allow taxpayers to deduct losses on the value of assets. Does that including deducting the full value of paper losses from stock-market corrections? Don’t count on it. Under current law taxpayers can only deduct $3,000 in net losses from the sale of financial assets in a year.

Complexity is one reason European countries, including France, Germany and Sweden, abandoned broad-based wealth taxes. Many of the rich dodged wealth taxes by exploiting carve-outs or moving. The very rich will find ways to avoid confiscatory taxes, but bad tax policy distorts investment.

Sweden abolished its wealth tax in 2007 following an exodus of capital and business tycoons. France repealed its net wealth tax in 2018, estimating that some 10,000 people with 35 billion euros worth of assets had left in the previous 15 years for tax reasons. The government was losing revenue from income taxes that the wealthy would have paid. Mrs. Pelosi says Democrats’ wealth tax will raise $200 billion to $250 billion over a decade, but that won’t cover even their green energy, electric-vehicle and other climate tax credits.

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By the way, a wealth tax is also probably illegal. The Constitution says Congress can only impose “direct taxes” that are “apportioned among the several states” according to population. While the Sixteenth Amendment authorized Congress to tax “incomes, from whatever source derived, without apportionment,” unrealized capital gains aren’t income.

Democrats figure that’s a fight for another day. Their sole goal now is to come up with some way, any way, to raise enough revenue on paper, however illusory, to fund their spending bill without losing the votes of Sens. Sinema and Joe Manchin. The AP reports that Mr. Manchin is fine with the wealth tax. Democrats will take any refuge in a political storm, even if it’s a mirage.

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