Wealth Tax

A wealth tax is a direct tax assessed annually on the stock of a taxpayer's net assets — typically real estate, financial holdings, business equity, and luxury items — minus liabilities. It differs from an income tax (which targets earnings flows) and from capital gains, inheritance, or property taxes (which target specific events or asset classes). Most designs apply only above a high exemption threshold and use progressive rates, often between 0.2% and 3%.

Wealth taxes are usually justified on three grounds: reducing wealth inequality, raising revenue from highly mobile capital that escapes income taxation, and taxing unrealized gains that compound untaxed. Critics argue they encourage capital flight, are administratively costly because they require annual valuation of illiquid assets (private businesses, art, unlisted shares), and may double-tax already-taxed income.

In practice, the instrument has retreated in the OECD. According to OECD reporting, twelve OECD countries levied individual net wealth taxes in 1990; by 2020 only a handful remained, including Norway, Spain, and Switzerland (where cantonal wealth taxes are a long-standing feature). France abolished its impôt de solidarité sur la fortune (ISF) in 2017 under President Emmanuel Macron, replacing it with a narrower real-estate wealth tax (IFI). Germany stopped enforcing its wealth tax after a 1995 Federal Constitutional Court ruling on unequal valuation. Spain introduced a temporary Impuesto de Solidaridad a las Grandes Fortunas in 2022 on net wealth above €3 million.

Proposals have re-emerged in U.S. politics, notably Senator Elizabeth Warren's 2019 plan for a 2% tax on net worth above $50 million and 3% above $1 billion, and Senator Bernie Sanders' parallel proposal. At the international level, Brazil used its 2024 G20 presidency to push a coordinated minimum tax on ultra-high-net-worth individuals, with economist Gabriel Zucman commissioned to draft a technical proposal.