Taxing Wealth: Another Terrible Idea

Here in the U.S., we sometimes hear calls for a new tax on wealth, rather than income. What better way to make rich people pay more? But of course, this is not a new idea. Wealth taxes have been abandoned by most developed countries. Charlotte Gifford writes, in the Telegraph:

In 1990, 12 OECD countries, all in Europe, levied wealth taxes. However, most of them repealed these in the 1990s and 2000s due to growing fears that in a globalised world the wealthy would simply take their riches elsewhere. France was the last to scrap its wealth tax in 2017, after losing an estimated 60,000 millionaires between 2000 and 2016, according to research by intelligence firm New World Wealth.

Now the only European countries to levy a wealth tax are Norway, Spain and Switzerland.

The article focuses on Norway, which under a new left-wing government has raised that country’s tax on wealth by .1%:

Record numbers of the country’s richest residents have fled since the Labour-centre coalition increased wealth tax rates by 0.1 percentage points, costing the government tens of millions in lost tax revenue. …

It is expected that even more wealthy Norwegians will leave because of the tax raid which kicked in last November.

Wealth taxes are like estate taxes, in that they raise very little money, only around one percent of government revenue in Norway’s case. So spite, more than greed, may be the character flaw that drives demand for such taxes.

And, as with all taxes, unintended consequences are inevitable:

Dan Neidle of Tax Policy Associates, a non-profit, said: “Norway is probably the developed country with the most significant wealth tax, but it’s still not very significant.”

This is in part due to discounts that apply to primary residence and unlisted shares.

Mr Neidle said these rules have some “weirdly distortive effects” on behaviour. “That creates an incentive to avoid listing your business, and put as much of your net worth into your house as possible. These are not great outcomes from a policy perspective.”

What are the chances that American liberals will learn from the experience of other countries that have tried to impose wealth taxes, and in most cases, repealed them? Zero.

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