A Wealth Tax Is Not How You Soak the Rich

The trouble with Trump’s 14.25 percent tax on fortunes north of $20 million, and the trouble with the SEIU’s more modest 5 percent tax on fortunes north of $1 billion, is that these are wealth taxes. A dozen years ago, at a Brookings panel on Thomas Piketty’s Capital in the Twenty-First Century, I pointed out to the great man that wealth taxes were kind of a hard sell in the United States. “What about property taxes?” Piketty replied. That shut me up, but after further reflection it occurred to me that these are such a touchy subject this side of the Atlantic that when the Great Inflation of the 1970s pushed up property taxes in California, the result was Proposition 13 and a national tax revolt that inspired candidate Ronald Reagan to slash top income-tax rates. Not again, thank you very much.

Politics aside, nearly every OECD country that’s tried to impose a broad-based wealth tax ended up repealing it. When these wealth taxes didn’t chase rich people out, they raised a pittance in revenue; in some instances, they managed to do both at the same time. France, Sweden, Austria, Denmark, Germany, the Netherlands, Finland, Iceland, and Luxembourg all discarded their wealth taxes. (This and the following data come courtesy of the nonprofit Tax Foundation.)

Today only four OECD countries still have wealth taxes: Colombia, Norway, Switzerland, and Spain—and in the latter country, regional governments in Madrid, Andalusia, and Galicia are trying to get rid of it. Excepting Colombia (where the wealth tax rises gradually to a maximum of 5 percent) wealth is never taxed so high as 5 percent. In Switzerland, wealth taxes vary by canton, but the rate is always below one percent. In Norway it’s 1.1 percent. In Spain the maximum rate is 3.5 percent.