Why countries are dropping their wealth taxes?
To me, many of the endorsements of a wealth tax feels more like expressions of righteous exasperation than like serious and considered policy proposals. Many of those who favor a wealth tax tend to favor a more European-style capitalism (and no, I don’t think of any country in western Europe as “socialist”) that places a higher value on economic equality.
Why Have Other Countries Been Dropping Their Wealth Taxes?
By: Timothy Taylor – Journal of Economic Perspectives
Wealth taxes and inequality
Zucman and al. study the effects of wealth taxes on wealth accumulation in Denmark. They find that wealth taxes have sizeable effects on taxable wealth, with the effects being much larger at the extreme top of the distribution than further down. According to their quasi-experimental analysis, reductions in wealth taxes for the very wealthy lead to a wealth build up over time which is equal to about 30% after 8 years.
A wealth tax rate reduction of 1.84 percentage points for the moderately wealthy.
A wealth tax rate reduction of 1.56 percentage points for the very wealthy.
Wealth Taxation and Wealth Accumulation: Theory and Evidence from Denmark
Authors: Gabriel Zucman, Katrine Jakobsen, Henrik Kleven, Kristian Jakobsen
From: University of California-Berkeley, University of Copenhagen, Princeton University, Social Capital Fund
Capital tax vs wealth tax
Guvenen and al. find that under wealth taxation, entrepreneurs who have similar wealth levels pay similar taxes regardless of their productivity. As a result, a wealth tax expands the base and shifts the tax burden from productive to unproductive entrepreneurs. This reallocation increases aggregate productivity and output. The reverse is true with capital taxes: under capital taxation entrepreneurs who are more productive, and therefore generate more capital income, pay higher taxes.
Use It or Lose It: Efficiency Gains from Wealth Taxation
Authors: Fatih Guvenen, Gueorgui Kambourov, Burhan Kuruscu, Daphne Chen, Sergio Ocampo
From: University of Minnesota, University of Toronto, Econ One Research, University of Minnesota