by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Democratic presidential hopeful Elizabeth Warren’s wide-ranging progressive platform is dependent in part on an “Ultra-Millionaire” wealth tax on the richest people in the United States, but questions about its efficacy and constitutionality make it a risky wager on which to stake her political future. …
… Although the United States has never had one, wealth taxes used to be fairly popular: As of 1996, fourteen nations in the OECD—an organization of “economically developed” nations—levied them. However, they have fallen out of favor. As of 2018, just three currently levy a wealth tax: Switzerland, Norway, and Spain. Spain temporarily cancelled its wealth tax in in 2008, then reintroduced it following the Great Recession.
Even in these three countries, wealth taxes are small contributors to total tax revenue. Switzerland collects 3.7 percent of total revenue from wealth taxes, Norway collects 1.1 percent, and Spain collects 0.5 percent. This is a persistent trend, according to an OECD report. Over the past 40 years, European wealth taxes usually were responsible for less than one percent of overall revenue.
A lack of revenue is one reason other economically developed countries have moved away from wealth taxes; another is to draw in foreign investment. This was the justification of French finance minister Bruno le Maire in announcing his nation’s repeal of its wealth tax in 2018.
The Tax Foundation, a right-leaning tax-policy think tank, outlined a number of other reasons wealth taxes might not be all they’re cracked up to be. They can be difficult to administer, because many assets held by the super-wealthy, such as constantly fluctuating stocks, are hard to value.
Further, a wealth tax is effectively a tax levied on the expected returns of whatever assets the taxpayer holds, meaning that he will invest less in those assets.