As long as there have been taxes, there have been calls to tax the rich. One idea, however, arouses particularly feverish reactions: a tax on wealth, and not just on salaries.
A conflict over such a project now divides France, where a heated debate took place Friday in Parliament over wealth tax proposals. But this approach has been upending politics in the United States and Europe for years, as inequality has reached staggering levels and public debt has shattered government budgets.
At the Labor Party conference in Britain in October, delegates called for a wealth tax. Surveys have shown that three quarters of Britons support the idea. Debate over the concept has been reignited even in countries like Germany and Ireland that had previously repealed their wealth taxes. And the Tax Observatory, a research organization funded by the European Union, has proposed a minimum wealth tax of 2% for the world’s approximately 3,000 billionaires.
For its supporters, taxing an individual’s entire assets – stocks, real estate, yachts, diamond tiaras, racehorses, art, fine wines, private islands and jets – rather than just income is one of the few ways to get people with dynastic wealth to pay their fair share.
It is also necessary, they argue, to dilute the growing political power of the super rich.
For opponents, wealth taxes constitute outlandish penalties for innovation and productivity, discouraging investment and crippling growth. It would also be a logistical nightmare to administer, they add. How would government tax collectors go about valuing a family’s prized collections of Ferraris, Chippendales, Picassos, NFTs and Birkens each year?
Wealth taxes, while not as common as some other levies, have actually been around for a long time. If you think about it, estate taxes are a form of wealth tax that targets a particular asset.
In the 17th century, Massachusetts colonists imposed a wealth tax on financial assets, land, ships, jewelry, and livestock. The first national wealth tax was imposed in the Netherlands in 1892. Colombia introduced one in 1935, as did India in 1957.
Wealth taxes were sometimes popular in Europe. Twelve countries had versions of it in 1990, although in many of them – including Germany, Sweden, Denmark, Austria, Finland and Luxembourg – the taxes were subsequently repealed.
Norway, Switzerland and Spain have wealth taxes, according to the Tax Foundation. France, Italy, Belgium and the Netherlands tax certain types of assets, but not overall net wealth.
The reasons for the repeals, as detailed in a 2018 report from the Organization for Economic Co-operation and Development, included the difficulty of administration, the burden placed on people who owned valuables but had little available cash, and the minimal amounts of revenue generated.
But there has been a surge in support for the wealth tax on the ultra-rich in recent years, and much of that can be attributed to three French economists – Thomas Piketty, Emmanuel Saez and Gabriel Zucman – who did groundbreaking work starting in the early 2010s to document the world’s astonishing concentration of wealth. Globally, the richest 1 percent own about 43 percent of the planet’s total wealth, according to Oxfam.
In France, one proposal, a tax on households with net worth above 100 million euros ($115.4 million), was aptly known as the Zucman tax. He estimates that this would raise up to 20 billion euros from 1,800 households.
After an acrimonious debate in the National Assembly on Friday, multiple variations of this tax were rejected.
“We are against this tax madness,” said Laurent Wauquiez, a deputy from the conservative Les Républicains party, about the Zucman tax. “By taxing everything, you will have nothing left to tax, and you will also discourage entrepreneurs and workers.”
François Ruffin, a left-wing MP, defended the tax, saying it amounted to “a measly 2 percent.” In eight years, “the fortunes of the 500 richest families have doubled by 600 billion euros, or 100 percent,” he added. “We take 2 percent from them, without leaving them 2 percent.”
In the United States, wealth tax proposals emerged during the final year of President Trump’s first term. Senators Elizabeth Warren and Bernie Sanders, both presidential candidates, proposed plans based on the work of Mr. Saez and Mr. Zucman that they said aimed to avoid the loopholes of failed European wealth taxes.
And after President Joseph R. Biden Jr. took office, Senate Democrats introduced a wealth tax aimed at billionaires, but it did not pass.
In 2020, Bolivia instituted what is arguably the best-named wealth tax – Impuesto a las Grandes Fortunas, or tax on great fortunes – which applied to people whose net wealth exceeded $4.3 million.
Although concerns about inequality may motivate the public to support the wealth tax, economic shocks and budget restrictions have historically been the most common causes of their adoption, the researchers found.
Following the Covid-19 pandemic, Spain introduced a temporary “wealth solidarity tax” in 2022 for individuals with net assets above €3 million. It was later made permanent.
Slowing growth and severe budgetary pressures have further increased interest in the wealth tax.
Last year, the Brazilian government, which chaired the Group of 20, tasked Mr. Zucman with developing a global plan to tax billionaires. This approach aims to allay concerns that the super rich will take the money and turn to a low-tax tax haven.
Whatever other objections critics of the wealth tax may have, fears that the tax and other alleged financial disincentives will disrupt the economy are often exaggerated, Nobel laureate economists Esther Duflo and Abhijit Banerjee have argued.
Professional athletes don’t cut back when there are salary caps. They say raising top tax rates tends to increase tax evasion, but research shows that this does not incentivize the rich to work less.
In France, after the tax proposals were rejected on Friday, Mr. Zucman appeared on television and said: “I’m not disappointed, because it will eventually happen.” »
“There is huge public demand for a billionaires tax,” he added. “It takes time to win all battles of this nature.”
Liz Alderman contributed to the report from Paris.
