For as long as there have been taxes, there have been calls to tax the rich. But one idea is sparking a particularly strong reaction: a tax on wealth, not just paychecks.
A dispute over such a plan is now dividing France, where there was a heated debate in parliament on Friday over proposals for a wealth tax. But this approach has been shaking up politics in the United States and Europe for years, as inequality has reached staggering proportions and national debt has exploded national budgets.
At the Labor Party conference in Great Britain in October, delegates called for a wealth tax. Polls have shown that three quarters of Brits support the idea. Even in countries like Germany and Ireland that had previously abolished their wealth taxes, debate over the concept has been revived. And the Tax Observatory, a research organization funded by the European Union, has proposed a global minimum wealth tax of 2 percent for the world's roughly 3,000 billionaires.
For advocates, taxing a person's total assets — stocks, real estate, yachts, diamond tiaras, racehorses, art, fine wines, private islands and jets — rather than just income is one of the few ways to make people with dynastic wealth pay their fair share.
They also argue that it is necessary to weaken the increasing political power of the super-rich.
For opponents, wealth taxes are absurd penalties for innovation and productivity; they inhibit investment and paralyze growth. Administration would also be a logistical nightmare, they add. How would state tax collectors value a family's prized collections of Ferraris, Chippendales, Picassos, NFTs and Birch bags each year?
Although property taxes are not as common as other taxes, they have actually been around for a long time. If you think about it, real estate taxes are a form of wealth tax that targets a specific asset.
In the 17th century, colonists in Massachusetts imposed a wealth tax on financial property, land, ships, jewelry, and livestock. The first national wealth tax was introduced in the Netherlands in 1892. Colombia introduced it in 1935, as did India in 1957.
Wealth taxes were popular in Europe at times. Twelve countries had versions in 1990, although many – including Germany, Sweden, Denmark, Austria, Finland and Luxembourg – later abolished taxes.
According to the Tax Foundation, Norway, Switzerland and Spain have wealth taxes. France, Italy, Belgium and the Netherlands tax certain types of assets, but not all net assets.
Reasons for the suspensions, listed in a 2018 report by the Organization for Economic Co-operation and Development, include difficult administration, the burden on people who owned valuables but were short on cash, and low revenues.
In recent years, however, there has been a resurgence in support for wealth taxes on the ultra-rich, and much of it can be attributed to three French economists—Thomas Piketty, Emmanuel Saez, and Gabriel Zucman—who did groundbreaking work beginning in the early 2010s, documenting the astonishing concentration of wealth around the world. According to Oxfam, the top 1 percent worldwide own around 43 percent of the world's total wealth.
In France, a proposal to impose a tax on households with a net worth of more than 100 million euros ($115.4 million) was aptly dubbed the Zucman tax. He estimates that this would raise up to 20 billion euros from 1,800 households.
After a heated debate in the National Assembly on Friday, several versions of this tax were rejected.
“We are against this tax madness,” Laurent Wauquiez, a lawmaker from the conservative Les Republicans party in France, said of the Zucman tax. “If you tax everything, you don’t have to tax anything, and you also discourage entrepreneurs and workers.”
François Ruffin, a left-leaning lawmaker, defended the tax, saying it was a “measly 2 percent.” In eight years, “the wealth of the 500 richest families has doubled by 600 billion euros, i.e. by 100 percent,” he added. “We take 2 percent from them and don’t leave them 2 percent.”
In the United States, wealth tax proposals entered the mainstream in the final year of President Trump's first term. Senators Elizabeth Warren and Bernie Sanders, both presidential candidates, laid out plans based on the work of Mr. Saez and Mr. Zucman that they said were aimed at avoiding the shortcomings of failed European wealth taxes.
And after President Joseph R. Biden Jr. took office, Senate Democrats introduced a wealth tax on billionaires, but it failed to pass.
In 2020, Bolivia introduced arguably the best-named wealth tax – Impuesto a las Grandes Fortunas, or Large Wealth Tax – which applied to individuals with a net worth of over $4.3 million.
Although concerns about inequality can drive public support for wealth taxes, economic shocks and tight budgets have historically been the most common drivers of their adoption, researchers have found.
In the wake of the Covid-19 pandemic, Spain introduced a temporary “solidarity wealth tax” in 2022 for individuals with a net worth of more than 3 million euros. It was later made permanent.
Slowing growth and severe fiscal pressures have further increased interest in wealth taxes.
Last year, the Brazilian government, which chaired the Group of 20 nations, tasked Mr. Zucman with drawing up a global plan to tax billionaires. This approach is intended to allay concerns that the super-rich will take the money and flee to a low-tax haven.
Whatever other objections critics of a wealth tax may have, fears that it would disrupt the economy and discourage the rich from working or innovating are overblown, said Abhijit Banerjee, a Nobel laureate in economics.
“There is evidence that they will do anything to avoid tax,” Banerjee said, either hiding assets or moving. But there is no evidence that they will be less effective. After all, professional athletes don't reduce their efforts when there are salary caps.
“I think in many countries in Europe there is some receptiveness to wealth tax,” he said. And if governments worked together, the rich would have fewer places to go.
In France, Mr Zucman appeared on television after the tax proposals were rejected on Friday and said: “I'm not disappointed because it will happen at some point.”
“There is a huge public demand for a billionaire tax,” he added. “All battles like this take time to win.”
Liz Alderman contributed reporting from Paris.