America is a rich country, but also an unequal one. What would be the impact of a wealth tax?
proposed a tax on wealth in 2014 as a solution to what he saw as capitalism’s innate tendency towards growing inequality. Many reviewers of his book, “Capital in the Twenty-First Century”, thought his idea outlandish. Now it has been adopted by an American presidential candidate, Senator Elizabeth Warren, who could conceivably win the White House in 2020. True, Mr Piketty wanted a global tax.
Experience would seem to be on the sceptics’ side. Net-wealth taxes do not have an encouraging record. In 1990, 12 rich countries levied them. By 2017 only four did: France, Switzerland, Spain and Norway. France has since mostly scrapped its levy, fearing that it made the country unfriendly to investors. Of the remainder, only Switzerland raises significant revenue .
Wealth can also be hidden overseas, or in complex legal structures designed to avoid tax. Larry Summers of Harvard University and Natasha Sarin of the University of Pennsylvania recently calculated in thethat the estate tax raises far less from estates valued at over $50m than would be expected from Messrs Saez and Zucman’s wealth data, so adept are the rich at avoiding the tax. Their data on billionaires came from the Forbes 400, an annual list of the mega-rich compiled bymagazine.
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