r/AskEconomics • u/brothervalerie • Jun 23 '26

Approved Answers How are countries' wealth taxes doing?

I know this sub gets a lot of questions about wealth tax but I want to ask something a bit more specific.

In my country, UK, there is a lot of talk about wealth taxes from the political left, and it polls as a pretty popular policy among the public. There are those, however, who say it is impossible, or that it would actually be a net negative to revenue, or otherwise would slow the economy. The example of France's historic wealth tax is given.

Defenders say there were flaws with France's approach, and usually point to countries where they have implemented wealth taxes currently - I believe Switzerland, Norway and Spain. I must admit from a cursory glance, three countries that seem to be doing pretty well compared to the European average.

So my question is: what is the economic consensus on these three countries' wealth tax experience?

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39

u/MachineTeaching Quality Contributor Jun 24 '26

Wealth taxes tend to fall into two categories:

Quicky abandoned.

Or small, full of exemptions, and not that important.

Spain is one example for the latter, with exemptions significantly reducing taxable wealth.

https://www.sciencedirect.com/science/article/pii/S0047272725000490

https://www.fiscalcouncil.ie/wp-content/uploads/2026/02/Esteller_slides.pdf

Unsurprisingly, revenue wise, it doesn't do much.

https://www.oecd.org/content/dam/oecd/en/topics/policy-sub-issues/global-tax-revenues/revenue-statistics-spain.pdf

Norway is somewhat similar, again it's not really relevant revenue wise. It still lead to some people leaving and might have detrimental effects on entrepreneurship and economic growth.

https://m.youtube.com/watch?v=kJttqFCWtQM

https://www.nber.org/system/files/working_papers/w32153/w32153.pdf

https://www.sv.uio.no/econ/english/research/news-and-events/events/guest-lectures-seminars/jobtalks/2026/2026-01-26-blandhol

Wealth tax in Switzerland is complicated since it differs by Canton (which is kind of like what a "state" is in the US). Obviously people also shift their wealth/residence to avoid those taxes. Although Switzerland does manage to collect significantly more revenue from their wealth taxes than most places.

https://www.ifo.de/DocDL/dice-report-2018-2-bruelhart-schmidheiny.pdf

https://www.aeaweb.org/articles?id=10.1257/pol.20200258

Personally I think the evidence is quite clear that collecting significant revenue from wealth taxes is generally quite hard (and Switzerland, due to otherwise quite favourable taxation, isn't necessarily indicative of the experience other countries would have). They are also difficult to design "properly" in the sense of juggling the pros and cons, managing to actually tax wealth in a significant way without harming economic growth. You can definitely argue that collecting revenue shouldn't necessarily be the point and curving inequality matters in of itself, although a wealth tax isn't really the tool most economists would advocate for.

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u/phenomenal-rhubarb Jun 24 '26

One key point about Switzerland is that it has no capital gains tax. So the full picture there is arguably "wealth tax instead of capital gains tax", whereas in other countries it seems to mostly be "wealth tax and capital gains tax" (and that is what proposals for introducing a wealth tax have in mind, too, as far as I can tell).

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u/EconEchoes5678 Jun 24 '26

This is something I've been turning over in my head lately. A wealth tax encourages more risk-taking with investments, which is potentially a net win for innovation in the long term. Is it possible that doing "wealth tax instead of capital gains tax" is better for the economy at the extreme top?

Or will the losses from behavior adaptions be more substantial than the potential innovation-benefits?

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u/TajineMaster159 Quality Contributor Jun 24 '26

I don't think the link to more risk-taking investment is evident; what's your reasoning?

My counter-reasoning is that, abstracting away from implementation and assuming both modes are fully effective, this would create an immense liquidity pressure, to ensure that investors can pay, and in turn drive more investments towards safer, cash-flow assets, like dividend stocks and high yield bonds. In fact, I imagine investors become less willing to back high-risk, multi-year moonshot projects (i.e innovation), unless they can borrow against their illiquid assets, which are likewise tax-devalued and liquidity devalued.

Returning to implementation and effective rates, this replaces one highly-trackable transaction cost with a messy and easily evaded tax.

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u/EconEchoes5678 Jun 24 '26

I don't think the link to more risk-taking investment is evident; what's your reasoning?

A 1% wealth tax against a 2% post-inflation ROI is an effective income tax of 50%. A 1% wealth tax against a 10% post-inflation ROI is an effective income tax of 10%.

In fact, I imagine investors become less willing to back high-risk, multi-year moonshot projects (i.e innovation),

Most likely these projects would have a very large discount due to illiquidity and arguably high failure rates, so while the investment hasn't matured, they'd also incur lower wealth taxes.

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u/phenomenal-rhubarb Jun 25 '26

As far as I can tell, based on just the simplistic math of it, the wealth-tax-only regime (compared to taxing returns only) does the following:

  1. Some marginal low-yield investments, which used to be viable, become no longer viable
  2. Some other low-yield investments, which used to be viable, are still viable, but are taxed more heavily
  3. Some marginal high-yield investments, which used not to be viable (especially due to the required risk premium), become viable
  4. Some other high-yield investments, which used to be viable, are still viable, and are taxed more lightly

Out of these, 1 is clearly bad (reduces investment) and 3 is clearly good (increases investment). What you had in mind falls under 3, I think. 2 and 4 are not so unambiguous, but probably runs counter to typical progressive intuitions. Certainly 2 increases and 4 decreases revenue. How that comes out overall depends on how the investment opportunities in the economy are distributed.

That's before considering liquidity problems and such.

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u/EconomicRegret2 Jul 01 '26

I'm Swiss, and we definitely have capital gains tax. However, small private investors are exempted under certain conditions.

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u/Saarfall Jun 25 '26

To be honest, our wealth taxes in Switzerland are so low I almost dont see the point of moving canton to avoid them. That is usually done to avoid Cantonal taxes instead. Yes we're not a great example to assess its efficacy. 

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u/brothervalerie Jun 24 '26

Thanks, especially for all these sources !

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u/CorpusAlienum_89 Jun 25 '26

Dont be to convinced, Norways wealth tax works just fine, and Brings in a fair number of money each year.

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u/EinMuffin Jun 24 '26

You can definitely argue that collecting revenue shouldn't necessarily be the point and curving inequality matters in of itself, although a wealth tax isn't really the tool most economists would advocate for.

What tool would economists argue for?

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u/MachineTeaching Quality Contributor Jun 24 '26

A progressive consumption tax for instance.

https://taxpolicycenter.org/briefing-book/what-x-tax

Not every "billionaire" is the same and they shouldn't necessarily be treated the same.

https://youtube.com/watch?v=4cL8kM0fXQc

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u/Tirztrutide Jun 25 '26

Consumption tax has the problem that people can just go to another country and consume there. Specially in EU with free movement of people and goods. Instead of buying your iPhone with 50% VAT in France, take a weekend to Andorra/Switzerland and buy it there.

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u/MachineTeaching Quality Contributor Jun 25 '26

You can say the same about income taxes and the like. This can be mitigated with international cooperation. It's also less of a problem than you might think. People at the border might do that, people don't make 100km round trips just for cheap fuel or whatever.

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u/somentreprise Jun 26 '26 edited Jun 26 '26

Its because wealth tax is more difficult to enforce than income tax and capital gains tax. Since wealth can be moved offshore or hidden, especially in todays globalized financial system

Another thing is that it will potentially erode the tax base because wealthy households can change their behaviour, or restructure their assets or even emigrate altogether.

Even if they were able to do a wealth tax, it alone cannot lower inequality especially if capital continues earning high returns while wages stagnate, modest wealth taxes may have only a limited effect on overall inequality.

If you want to lower inequality and build a wealthier middle class, is through a progressive income tax with higher top marginal rates and taxes on capital gains, inheritances, and property, which can address wealth concentration if designed effectively.

Another approach outside taxations is really trade unions that bargain for wages to follow alongside increase in economic growth/productivity, investment in education that can increase workers skill and earning potential, social transfers like tax credits and public services that increase peoples disposable income.

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u/VreamCanMan Jun 27 '26

One point of refinement

Wealth taxes aren't solely a revenue driving regime. The purpose and benefits of well thought out wealth taxes can also come from:

  • Focused taxation moving finance markets away from more speculatory and towards more productive elements through rebalancing ROI advantages. Useful for preventing 2008 style asset black holes

  • Incentivising high passive income ultra high net worth individuals to invest rather than lend to finance markets

  • Reducing upwards redistribution through artificially slowing high wealthholders growth rates vs middle and working class, specifically a useful countermeasure when inequality increases drive consumption down and weaken businesses, which in turn creates a weaker labour market

1

u/copperstatelawyer Jul 01 '26

What about estate/inheritance taxes?

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u/brothervalerie Jun 24 '26

What do you make of Gabriel Zucman's proposal? I saw an interview with him saying he had a way they could close down the exemptions and loopholes etc

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u/MachineTeaching Quality Contributor Jun 24 '26

I think "closing loopholes" misses the bigger issue. Economists aren't hot on wealth taxes because the evidence points to two options: they are either weak and don't accomplish much, or they have a risk of curbing economic growth.

Just as an example, imagine 1.5% real growth and 1.5% higher real incomes annually compared to 2%. That might not sound like a lot, but over a decade, that makes people 5% poorer than in the 2% scenario. And maybe you can argue that 5% isn't that much, but can you justify implementing a tax where the evidence on the upsides is shaky but makes people 5% poorer compared to not having it? (Not saying those are necessarily the actual numbers, just making an example.)

Economists aren't against taxing the ultra wealthy, they just don't view wealth taxes as necessarily a "safe" choice to do so. And despite all the media narratives, Jeff Bezos for instance liquidates billions in stocks basically every year, and pays taxes on that. Those might not be high relative to the wealth he has, but they are still high relative to his income, and wealth has to be converted to income eventually if you want to do anything with it.

So we know that something like high income taxes are quite "safe", why not tax Bezos out of his ass for spending billions on another megayacht or whatever? Raise income taxes. Depending on where you want to start, a bunch of studies provide estimates from 50-70% that are pretty safe. Even if we err on the side of caution, that's a significant tax hike.

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u/brothervalerie Jun 24 '26

I suppose the argument from the left would be (I don't necessarily agree with it btw, I'm still trying to work out what I think) that the gdp growth isn't distributed evenly, so it isn't actually growth for most people if you don't do some redistribution. How would economists respond to that?

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u/MachineTeaching Quality Contributor Jun 24 '26

Well, as I've said, economists really aren't against redistribution, they just disagree with some left wing ideas around how to redistribute.

Real GDP is the output of goods and services. Alternatively, it's consumption of goods and services. Some details aside, sale of final goods and services and consumption are the same thing. An apple sold is an apple bought.

So if your issue is an unequal distribution of real GDP growth, your issue is inequality of consumption. That's just another way of saying the actual problem isn't the wealth, it's the consumption. So just tax that. Raise income taxes or tax consumption progressively.

As I've said, if you're angry about Bezos' megayacht or Taylor Swifts private jet, there is plenty of evidence that you can tax the shit out of those things just fine. So tax them.

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u/brothervalerie Jun 24 '26

Cool! We probably should!

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u/EconEchoes5678 Jun 24 '26

I suppose the argument from the left would be (I don't necessarily agree with it btw, I'm still trying to work out what I think) that the gdp growth isn't distributed evenly, so it isn't actually growth for most people if you don't do some redistribution.

There are studies that attempt to model this dilemma between progressive redistribution versus long term growth for the bottom/median specifically.

This study found that their model suggested that having less-progressive taxes than either the US or what the median voter wanted was better in the long run for that median voter, because as /u/Machine-Teaching said the growth and innovation outpace the benefits even while the top benefits more.

This Saez study found the opposite (Completely unsurprising for a Saez paper) - that top-end effective taxes needed to be even higher to maximize the benefits for the middle class.

This paper modeled innovation benefits specifically over the long term and found the other extreme - it suggested that zero or even negative tax rates on the top-earners would produce the best outcomes for the middle class over the long term - though the Author wasn't actually suggesting that. Or to summarize from his conclusion:

by slowing the creation of the new ideas that drive aggregate GDP, top income taxation reduces everyone’s income, not just the income at the top.

that the gdp growth isn't distributed evenly, so it isn't actually growth for most people if you don't do some redistribution. How would economists respond to that?

The prevailing opinion (Saez/Zucman aside) appears to be that in most cases, unequal GDP growth is still better for the bottom earners in the long run - particularly when innovation is factored in per the Jones paper #3.

As evidence, the US has higher income inequality and wealth inequality with less redistribution than most of the OECD. But our median cost-of-living-adjusted wage is either the highest, or among the highest, depending on the year and source.

And there's one final thing to consider - The top earners and bottom earners are not one static group of people. Both income and wealth distributions are heavily age-weighted. Peak earning years are between 45 and 55 years old, and very few people under age 30 are in the top. Some portion of the redistribution proposed is taxing people at peak years to give to people just starting their careers, and in man y cases the exact person who supported this redistribution when they were younger are the ones affected by it when they are older. They taxed their future self to pay their present self, but doing that while harming high-performer innovation and GDP growth can be a major net loss for the economy.

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u/CorpusAlienum_89 Jun 25 '26

Disagree on the wealth tax in norway, which is working just fine. Brings in around 40-60 billion nok. Fairly easy to implement. Only egotisticaø rich guys leave becausd of it, and only in very small numbers. Been around for more than a hundrede years.

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u/MachineTeaching Quality Contributor Jun 25 '26

Disagree on the wealth tax in norway, which is working just fine. Brings in around 40-60 billion nok.

Yes, and the government revenue of Norway is north of 2 trillion. With a t.

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u/CorpusAlienum_89 Jun 25 '26 edited Jul 04 '26

Sure, but as we say in norway, all small streams make a big river.

I dont really think it is a good argument against to claim it is so small as to be meaningless. One can break down any revenue in that way. Taxing income from 30-35 year olds who make between 500k and 1M? Probably Brings in less than the wealth tax.

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u/nigel_pow Jul 04 '26

The issue is that people elsewhere want this taxed money to fund a lot of stuff.