The groundbreaking wealth taxes proposed by Elizabeth Warren and Bernie Sanders would face a major obstacle to successful implementation, even beyond the inevitable political and constitutional challenges: the difficulty of accurately assessing billionaires' assets.

“The fundamental problem with a wealth tax is determining how much wealth a person has," said Ric Edelman, a top wealth adviser for the ultrarich. "Billionaires have assets in privately held companies, artwork, and collectives that are hard to value."

To establish wealth tax liability, the Warren/Sanders plans would set valuations through a combination of taxpayer self-reporting and the IRS obtaining data from banks and financial institutions. The IRS could audit or contest self-reported valuations.

But, on the flip side, individuals could challenge the government’s assessment of their wealth in court. Taxpayers would be particularly likely to fight when it comes to assessing the subjective worth of privately held companies, personal belongings, and expensive art collections.

“Billionaires will vigorously fight the valuations of their assets in court,” said Edelman.

Such challenges would lower the revenue wealth taxes could raise, putting in doubt the funding for the candidates' ambitious social programs, such as "Medicare for all" and universal child care. Other liberals have already raised doubts that the taxes would hit revenue targets. Larry Summers, former president of Harvard University and economic adviser to President Barack Obama, has called Warren’s estimate of wealth tax revenues “naively high.”

Sanders' wealth tax plan would raise $4.35 trillion over 10 years, economic advisers to the campaign estimate, while Warren’s plan would raise approximately $2.75 trillion over a decade. Warren also plans to raise an additional $1 trillion for her new "Medicare for all" plan by doubling her wealth tax on the ultrarich.

The differences between the values the IRS assigns to assets and those claimed by taxpayers can be extreme. For example, in the years after Michael Jackson died in 2009, the IRS said that the value of the pop star’s name and image, the total value of his "estate," was more than $434 million. The estate’s own valuation? Just $2,105. The huge discrepancy means that hundreds of millions of dollars in estate taxes are at stake.

The case rested on the fact that the IRS accused the estate of undervaluing some of Jackson’s assets by hundreds of millions of dollars. The estate, however, argued that Jackson's name and likeness at the time was worth next to nothing due to his tainted reputation, damaged by child abuse allegations and strange public behavior. The case is still in tax court, but the final decision could create a precedent when it comes to assessing other high net worth estates for additional taxes on their name and likeness rights.

The estate tax, which was levied on Jackson, is a tax on the right to transfer assets to someone else when a person dies. It serves as a useful parallel to see how the IRS might deal with implementing a wealth tax, which would also tax cumulative wealth, but on an annual basis.

Sanders' wealth tax plan would tax households with a net worth above $32 million, which is about 180,000 households, the top 0.1%, starting at a 1% tax rate and rising to 8% for married couples with more than $10 billion in wealth. In contrast, Warren’s plan would levy a 2% wealth tax on assets worth more than $50 million, and a 6% tax on fortunes worth more than $1 billion, affecting approximately 75,000 families.

“This is the biggest challenge we have to figure out to regarding the wealth tax — the market value of wealth: figuring out the worth of goods, assets of the rich,” said Steve Wamhoff, director of federal tax policy at the Institute on Taxation and Economic Policy, a nonpartisan tax policy organization. Wamhoff was formerly a senior tax policy analyst for Sanders' Senate office.

“The thing about our tax system is: We don’t know how much anything is worth other than when we buy it or sell it,” Wamhoff said.

The central objective of the Democrats' wealth tax plans is to collect government revenue from the humongous amount of unsold assets that millionaires and billionaires have. Currently, the U.S. taxes assets only when they're sold through the capital gains tax, not, for example, stocks in a company that have appreciated in value but not been sold yet.

A majority of the ultrarich’s wealth lies in nonliquid assets they own, such as the companies they control, stocks, or assets in real estate, all of which can appreciate over time but today are not be taxed until the moment they are actually sold.

One possibility for addressing the problem of valuing assets, Wamhoff said, would be to assume that each asset owned by a wealthy person would appreciate at some standard rate, perhaps based on general economic growth or based on a rate specific to the type of asset, until the asset is actually sold. At that point, the wealth tax calculation for previous years would be corrected, either by taking more money from the taxpayer or giving them money back through a tax rebate.

Another approach, formulated by economists Emmanuel Saez and Gabriel Zucman, who have advised both the Warren and Sanders campaigns on their wealth taxes, would be to create new markets to assign prices to assets based on supply and demand. Here's how the markets would work: In the case of a disagreement between an ultrarich person and the IRS about the value of an asset, such as a private business, the owners could pay their wealth tax via the stock of their company, for example, and then the government could sell the stock themselves and create a new market for that good. In such situations, the taxpayer would pay their wealth tax, or at least part of it, by giving the IRS the stocks themselves, without any monetary value attached to it. Then the IRS would itself sell the stocks to find out how much they were worth and put the real money from selling the stock into the government coffers.

The setup would also discourage those subject to the wealth tax from undervaluing their assets to the IRS, because if the IRS sold their asset for more than they said it was worth, that person would have lost money on that asset.

To be clear, calculating the net worth of the ultrarich for the purposes of the wealth tax is inherently complicated. The wealth tax will impose a significant effort and cost on those affected by it, forcing them to haggle over the value of their assets and then, in some cases, liquidate enough of them to actually pay the tax.

Multiple economists, though, told the Washington Examiner that if the IRS were given the right resources and manpower, it would likely get better over time at evaluating the subjective value of the assets of the ultrarich.

“We have a lot of experience with real estate valuations, for example; we seem to be able to get close enough,” said Steve Rosenthal, a senior fellow at the nonpartisan Tax Policy Center. "And when the IRS gets it wrong, then people can fight with the government and hash it out."

Some assets, such as the worth of art pieces, will always remain tricky to assess, though.

"You could see people moving their wealth into art, and how do you know how much those stupid Jeff Koons balloons are actually worth?” said Wamhoff, referencing artist Jeff Koons’ balloon animalesque sculptures that controversially sold for a record $91 million, making it the most expensive work by a living artist.

