A Wealth Tax Is Not How You Soak the Rich

The problem with Trump’s 14.25% tax on fortunes over $20 million, and the problem with SEIU’s more modest 5% tax on fortunes over $1 billion, is that they are wealth taxes. A dozen years ago, during a Brookings panel on Thomas Piketty’s project Capital in the 21st centuryI pointed out to the big man that wealth taxes were a pretty tough sell in the United States. “What about property taxes? » Piketty replied. This silenced me, but upon reflection I realized that this was such a touchy subject on this side of the Atlantic that when the Great Inflation of the 1970s raised property taxes in California, the result was Proposition 13 and a national tax revolt that inspired candidate Ronald Reagan to slash property taxes. income-tax rates. Not yet, thank you very much.

Politics aside, almost every OECD country that attempted to impose a large-scale wealth tax ended up repealing it. When these wealth taxes have not driven out the rich, they have generated paltry revenues; in some cases, they managed to do both at the same time. France, Sweden, Austria, Denmark, Germany, the Netherlands, Finland, Iceland and Luxembourg have all abandoned their wealth tax. (This and the following data come with courtesy of the non-profit Tax Foundation.)

Today, only four OECD countries still have a wealth tax: Colombia, Norway, Switzerland and Spain – and in the latter country, the regional governments of Madrid, Andalusia and Galicia are trying to get rid of them. With the exception of Colombia (where the wealth tax gradually increases to a maximum of 5%), wealth is never taxed. up to 5 percent. In Switzerland, wealth taxes vary by canton, but the rate is always less than 1 percent. In Norway, it’s 1.1 percent. In Spain, the maximum rate is 3.5 percent.