Why Have Other High-Income Countries Dropped Wealth Taxes?

Advocates of a wealth tax for the United States need to confront a basic question: Why have other high-income countries decided to drop their own wealth taxes? Sarah Perret explores this issue in "Why did other wealth taxes fail and is this time different? (Wealth and Policy Commission, Working Paper #6, 2020). Perret writes;  

In 1990, there were twelve OECD countries, all in Europe, that levied individual net wealth taxes. However, most of them repealed their wealth taxes in the 1990s and 2000s, including Austria (in 1994), Denmark and Germany (in 1997), the Netherlands (in 20012 ), Finland, Iceland, and Luxembourg (in 2006) and Sweden (in 2007). Iceland, which had abolished its wealth tax in 2006, reintroduced it as a temporary ‘emergency’ measure between 2010 and 2014. Spain, which had introduced a 100% wealth tax reduction in 2008, reinstated the wealth tax in 2011. The reinstatement of the wealth tax was initially planned to be temporary but has been maintained since. France was the last country to repeal its wealth tax in 2018, replacing it with a tax on high-value immovable property. In 2020, Norway, Spain and Switzerland were the only OECD countries that still levied individual net wealth taxes.

The basic story, as Perret tells it, is that countries which gave up on the wealth tax largely decides that it was possible to tax wealth in other ways; and that defining how to tax "wealth" was running into enough problems of exemptions and exceptions that it wasn't worth the relatively small amount of revenue being raised. 

There are a number of taxes that work in a way similar to a wealth tax. A property tax (like the French tax on "high-value immovable property" mentioned above) is a tax on one kind of wealth. An estate tax or a gift tax is a tax on wealth. A capital gains tax can be, on average, similar to a wealth tax as well. Parret writes:  

In some ways, a wealth tax is similar to a tax on capital income. For instance, if an individual taxpayer has a total net wealth of EUR 10 million that earns a rate of return of 4%, the tax liability will be the same whether the government levies a tax of 30% on the capital income of EUR 400,000 or a wealth tax of 1.2% on the capital stock of EUR 10 million. Both will end up raising EUR 120,000. A capital income tax of 30% is thus equivalent to a wealth tax of 1.2% where the rate of return is 4%.
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