That's an interesting definition, could you cite, where you got it from?
It's the old-school definition, the definition one uses to become or remain wealthy. The means of production are really the only thing that has value by something other than convention.
it totally ignores non-productive wealth, such as precious metals, Bitcoins, intellectual property, and currency. By your definition, an owner of, say, a shoe-repair shop is richer than a guy with a $10 mln bank-account...
Many things have value, but not all valuable things are wealth. Roughly speaking, you have:
* "bling" - stuff that costs significant money to maintain, like a fancy car
* parked money - non-productive land, gold, safe loans, etc
* speculative gambling
* wealth - ownership of the means of production
Wealth is the thing that (long-term average) grows over time. Everything else is a (risk- and inflation-adjusted) loss on average. For centuries, wealth was "assets that produce income", which was basically only farmland. Land was valued not by it's purchase price (a newer notion than you'd think) but by its annual income. As economy theory grew up, "the means of production" became the more clear concept.
Note that there's a useful notion of wealth that includes your labor - you have a sort of inherent wealth because you can be productive. Sometimes that's a very useful notion of wealth.
Which means, that whoever earned those dollars lost some of their value. Where did it go
They had value only by convention and that convention changed.
Now, it is not tax on all forms of wealth, merely on savings held in dollars.
Assuming you shop around for savings accounts (instead of just getting taken by the place you happen to have a checking account with), you can consistently get a bit less interest than inflation. When inflation rises, the interest rate for the best savings accounts will rise as well (ditto new CDs). Rising inflation shouldn't really be a tax on savings, except people are too lazy to move their savings if needed when rates rise and banks take great advantage of this.
Of course, all that's out the windows when US savings interest rates hit the legal maximum of 5.25%, but that's how euro-dollars came to be (dollar savings accounts at a European bank - all the rage in the Carter years).