<blockquote>
<p>What are some real-life examples of wealth-taxes being implemented and how did they go?</p>
</blockquote>
<p>There many examples of wealth taxes tried in various European countries. However, most of them were abolished and generally speaking serious scholars consider them failures. You can see historical overview of many of these attempts in <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/1475-5890.12278" rel="nofollow noreferrer">Perret (2021)</a>. The article explores the evidence from Austria, Denmark, Finland, France, Germany, Netherlands, Norway, Spain, Sweden and Switzerland. I won't go into details into each example but generally the commonly cited reasons for failure are:</p>
<ul>
<li>they deliver extremely little revenue (relative to other taxes such as income tax, capital gains, VAT etc)</li>
<li>they significantly distort investment and savings decisions</li>
<li>they lead to capital flight (which is bad for the country, since output, and hence incomes including wages critically depend on capital stocks).</li>
<li>they lead to serious problems for businesses as they work irrespective of returns (e.g. family firm that breaks even might be forced to default just as a result of such tax - something that would not happen with regular business/income tax).</li>
<li>they are very difficult to administer (even relative to taxes such as VAT that are already quite difficult).</li>
<li>valuation problems. Outside wealth being actively traded (e.g. stocks) it is incredibly difficult to value private business, houses, works of art etc.</li>
<li>government can only assigns who de jure pays the tax not who de facto bears the burden. Tax burdens are often shifted, sometimes quite substantially. For example, empirical evidence shows that capital tax burden is heavily shifted onto labor since it affects negatively labor demand and hence wages (e.g. see  <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1682041" rel="nofollow noreferrer">Roy-Cesar &amp; Vaillancourt, 2010</a>; <a href="https://www.journals.uchicago.edu/doi/abs/10.1086/209877" rel="nofollow noreferrer">Gruber, 1997</a>). Similar effects are likely present in wealth taxation, although here we do not have long term empirical studies because most wealth taxes are rather quickly abolished.</li>
</ul>
<p>Good non-technical explanation is also provides by Summers (who is one of the world's top economist) <a href="http://larrysummers.com/2019/04/01/fair-comprehensive-tax-reform-is-the-right-path-forward/" rel="nofollow noreferrer">here</a>.</p>
<p>However, one could make some arguments that this time could be different, since modern technology alleviates some problems (thanks to internet there is less privacy, and more data on wealth)  as for example, argument made by Perret in the last chapter, but many economist are still not convinced (e.g. Summers). This is not because of ideology, Summers is publicly known to be Democrat, and former advisor to Obama and Treasury secretary under Clinton (which is why I picked him as an example).  This is because technology does not solve the fundamental issue of wealth tax having serious distortive effect on investment and saving, and similarly to the taxes on capital it has issues with tax burden being largely shifted onto labor through supply-demand effects. Hence, even if you would follow Rawlsian Max-Min principle, which is considered to be the foundational economic idea of left-leaning liberalism, optimal wealth taxes are around 0%.  Of course, if one would want to minimize inequality at any cost even to the poor, they could make sense, but they generally fail if welfare criterion tries to let's say also maximize welfare of poor such as Max-Min criterion or only make sense at insignificant levels.</p>
<blockquote>
<p>Is there some sort of consensus of the experts in the policy and economic communities on the issue of wealth tax?</p>
</blockquote>
<p>Most economist believe that wealth taxes are bad idea, only very few economists believe they are good idea, but there is still a non-trivial number of economists that are uncertain on the issue.  For example, a poll of top <a href="https://www.igmchicago.org/surveys/wealth-taxes/" rel="nofollow noreferrer">Ivy league policy economists in US</a> and <a href="https://www.igmchicago.org/surveys/wealth-taxes-2/" rel="nofollow noreferrer">top policy economists in EU</a> shows that most economists believe wealth taxes are difficult to implement (see panel A) and there are other taxes that can achieve the same goals of reducing inequality at lower cost to society (see panel C). Although the poll has high non-response rate (which is the reason why total percentages are low and common issue with academic polls), the results should be representative. Even famous <a href="https://www.ucl.ac.uk/%7Euctp39a/MirrleesReview_FS_2011.pdf" rel="nofollow noreferrer">Mirrelees Review</a> recommends only to tax returns to wealth as opposed to wealth itself.    However, at the same time wealth tax has some proponents who are serious mainstream economists such as <a href="https://www.aeaweb.org/articles?id=10.1257/pandp.20221055" rel="nofollow noreferrer">Saez
&amp; Zucman (2019)</a>. Nonetheless, even proponents of wealth tax argue only for very small wealth taxes no more than few percentage points because of the strong distortions they generate.</p>

CC BY-SA 4.0
2023-03-28T06:39:39.500Z
I think your statement about serious scholars in general being against a wealth tax is too strong. It’s not so settled and there is more literature coming out everyday, e.g. https://www.aeaweb.org/articles?id=10.1257/aeri.20200319
BB King
CC BY-SA 4.0
2023-03-28T08:32:47.270Z
@BBKing but I don’t make that statement just randomly, it’s supported by polls of policy economists where the support for wealth tax is low. Yes science always progresses but few papers don’t invalidate general consensus, take for example free trade, it has even stronger support among economists than this and it’s one of the largest consensuses in econ. Yet you can easily find some papers that challenge it even in good journals. One or two papers don’t necessarily overturn consensus unless they offer very solid empirical evidence, the paper you link
1muflon1
CC BY-SA 4.0
2023-03-28T08:36:52.187Z
Does not even claim wealth tax is efficient, it just says with better enforcement it is *possible* to have it without it quickly collapsing, but it does not even deal with issues of efficiency. Even people like Atkinson were generally opposed to the idea. I think it’s fair to say that most mainstream economists consider it bad idea irrespective of their ideological leaning
1muflon1
CC BY-SA 4.0
2023-03-28T14:54:18.360Z
I understand and you provide good evidence of your assertion, I just think its a bit too strong. As you mention, the poll has a lot of non-response. The main issues raised by papers, such as being difficult to implement and not raising lots of revenue are being reviewed with new papers on ways to make them more effective (like the one I mentioned). And all the issues with inefficiency - capital taxes have very similar issues and we still have them in most countries. So that's not conclusive to me that the tax is a bad idea as a consensus, becusue all taxes are a bad idea for efficiency.
BB King
CC BY-SA 4.0
2023-03-28T14:57:06.117Z
Its just a bit strong to say its a consensus, when you mention that we have 2 of the leading economists in the world on public finance, Saez and Zucman, being proponents of it. They are not just "some mainstream" economists, they some of the most important researchers who are shaping the field. Even if they argue for a few percentage points, it doesn't mean the tax as a whole should not be there. Many say that capital gains tax should also be small for similar reasons, but we still have it.
BB King
CC BY-SA 4.0
2023-03-28T16:41:35.820Z
@BBKing 1. But even Z&S consider the European wealth taxes failures. Note if you read that para I am talking about past wealth tax examples. 2. In the second part of my answer which is not about past experience I do not have such strong statement. 3. In addition even Z&S are still quite cautious about them. 4.  Wealth taxes have much larger issues than burden shifting which was the main argument against capital taxes. In addition, we also used to have wealth taxes in EU and they were not abolished because of some right wing radicals getting elected all over Europe
1muflon1
CC BY-SA 4.0
2023-03-28T16:42:18.167Z
but because they were utter failures, sure technology solves some issues about valuation problem but doesn't fix other issues that are more serious.
1muflon1
CC BY-SA 4.0
2023-03-28T16:53:12.383Z
Yes, but my point is, your overall conclusion of both parts is that there is a consensus currently on whether wealth taxes can work or not going forward, in general, among academics. Give the 2nd part of your post, I don’t think it’s a warranted overall conclusion, regardless of past failures, because research is evolving on how to improve on past experiences. I think you can nuance a bit between consensus on past experiences and consensus on current policy going forward, that’s all.
BB King
CC BY-SA 4.0
2023-03-28T17:08:58.380Z
Its just, as is, if I read your post as a layperson, I would get the impression that a vast majority of economists currently would say to a policymaker that wealth taxes cannot work in any country under any circumstance. I think that’s misleading. From my experience in this field for about 8 years, I just don’t think its a clear consensus among most people, for example, at current international conferences. Especially the younger generation led by Saez. I’ll leave it at that.
BB King
CC BY-SA 4.0
2023-03-27T22:21:00.737Z
2023-03-27T22:26:24.267Z
2023-03-27T22:26:24.267Z
1muflon1
<p>Whenever I see discussions of wealth taxes, inevitably one main assertion keeps being, well, <em>asserted</em>: &quot;wealth tax will never work because it's too difficult to implement&quot;. Of course more specific examples of the exact difficulties are being given: &quot;How would you even measure it?&quot;, &quot;What about illiquid assets?&quot;, &quot;How are you planing to stop people hiding their wealth offshore?&quot; etc.</p>
<p>But while it is easy to see problems with the approach, <em>every</em> approach has it's problems and one can never be sure of what it's outcomes can be unless it's tested empirically, even if just by smaller-scale research and trying to model how things would go on a larger scale.</p>
<p>So I suppose the questions is two-fold:</p>
<ul>
<li>What are some real-life examples of wealth-taxes being implemented and how did they go?</li>
<li>Is there some sort of consensus of the experts in the policy and economic communities on the issue of wealth tax?</li>
</ul>
<p>The question is meant to focus on objective, verifiable outcomes rather than values and politics.</p>

<taxation><empirical-evidence><wealth>
What data / evidence is there to support the assertion that wealth taxes are ineffective because they're difficult to implement?
KubaFYI
# What data / evidence is there to support the assertion that wealth taxes are ineffective because they're difficult to implement?

(Asked by: username_0 on 2023-03-27)

Whenever I see discussions of wealth taxes, inevitably one main assertion keeps being, well, *asserted*: "wealth tax will never work because it's too difficult to implement". Of course more specific examples of the exact difficulties are being given: "How would you even measure it?", "What about illiquid assets?", "How are you planing to stop people hiding their wealth offshore?" etc.

But while it is easy to see problems with the approach, *every* approach has it's problems and one can never be sure of what it's outcomes can be unless it's tested empirically, even if just by smaller-scale research and trying to model how things would go on a larger scale.

So I suppose the questions is two-fold:

* What are some real-life examples of wealth-taxes being implemented and how did they go?
* Is there some sort of consensus of the experts in the policy and economic communities on the issue of wealth tax?

The question is meant to focus on objective, verifiable outcomes rather than values and politics.

**Tags:** taxation, empirical-evidence, wealth


---

## 1 answers

### Answer by username_1 on 2023-03-27. Score: 3

> What are some real-life examples of wealth-taxes being implemented and how did they go?

There many examples of wealth taxes tried in various European countries. However, most of them were abolished and generally speaking serious scholars consider them failures. You can see historical overview of many of these attempts in [Perret (2021)](https://onlinelibrary.wiley.com/doi/full/10.1111/1475-5890.12278). The article explores the evidence from Austria, Denmark, Finland, France, Germany, Netherlands, Norway, Spain, Sweden and Switzerland. I won't go into details into each example but generally the commonly cited reasons for failure are:

* they deliver extremely little revenue (relative to other taxes such as income tax, capital gains, VAT etc)
* they significantly distort investment and savings decisions
* they lead to capital flight (which is bad for the country, since output, and hence incomes including wages critically depend on capital stocks).
* they lead to serious problems for businesses as they work irrespective of returns (e.g. family firm that breaks even might be forced to default just as a result of such tax - something that would not happen with regular business/income tax).
* they are very difficult to administer (even relative to taxes such as VAT that are already quite difficult).
* valuation problems. Outside wealth being actively traded (e.g. stocks) it is incredibly difficult to value private business, houses, works of art etc.
* government can only assigns who de jure pays the tax not who de facto bears the burden. Tax burdens are often shifted, sometimes quite substantially. For example, empirical evidence shows that capital tax burden is heavily shifted onto labor since it affects negatively labor demand and hence wages (e.g. see [Roy-Cesar & Vaillancourt, 2010](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1682041); [Gruber, 1997](https://www.journals.uchicago.edu/doi/abs/10.1086/209877)). Similar effects are likely present in wealth taxation, although here we do not have long term empirical studies because most wealth taxes are rather quickly abolished.

Good non-technical explanation is also provides by Summers (who is one of the world's top economist) [here](http://larrysummers.com/2019/04/01/fair-comprehensive-tax-reform-is-the-right-path-forward/).

However, one could make some arguments that this time could be different, since modern technology alleviates some problems (thanks to internet there is less privacy, and more data on wealth) as for example, argument made by Perret in the last chapter, but many economist are still not convinced (e.g. Summers). This is not because of ideology, Summers is publicly known to be Democrat, and former advisor to Obama and Treasury secretary under Clinton (which is why I picked him as an example). This is because technology does not solve the fundamental issue of wealth tax having serious distortive effect on investment and saving, and similarly to the taxes on capital it has issues with tax burden being largely shifted onto labor through supply-demand effects. Hence, even if you would follow Rawlsian Max-Min principle, which is considered to be the foundational economic idea of left-leaning liberalism, optimal wealth taxes are around 0%. Of course, if one would want to minimize inequality at any cost even to the poor, they could make sense, but they generally fail if welfare criterion tries to let's say also maximize welfare of poor such as Max-Min criterion or only make sense at insignificant levels.

> Is there some sort of consensus of the experts in the policy and economic communities on the issue of wealth tax?

Most economist believe that wealth taxes are bad idea, only very few economists believe they are good idea, but there is still a non-trivial number of economists that are uncertain on the issue. For example, a poll of top [Ivy league policy economists in US](https://www.igmchicago.org/surveys/wealth-taxes/) and [top policy economists in EU](https://www.igmchicago.org/surveys/wealth-taxes-2/) shows that most economists believe wealth taxes are difficult to implement (see panel A) and there are other taxes that can achieve the same goals of reducing inequality at lower cost to society (see panel C). Although the poll has high non-response rate (which is the reason why total percentages are low and common issue with academic polls), the results should be representative. Even famous [Mirrelees Review](https://www.ucl.ac.uk/%7Euctp39a/MirrleesReview_FS_2011.pdf) recommends only to tax returns to wealth as opposed to wealth itself. However, at the same time wealth tax has some proponents who are serious mainstream economists such as [Saez
& Zucman (2019)](https://www.aeaweb.org/articles?id=10.1257/pandp.20221055). Nonetheless, even proponents of wealth tax argue only for very small wealth taxes no more than few percentage points because of the strong distortions they generate.

> **Comments:**
> **username_2**: I think your statement about serious scholars in general being against a wealth tax is too strong. It’s not so settled and there is more literature coming out everyday, e.g. https://www.aeaweb.org/articles?id=10.1257/aeri.20200319  
> **username_1**: @username_2 but I don’t make that statement just randomly, it’s supported by polls of policy economists where the support for wealth tax is low. Yes science always progresses but few papers don’t invalidate general consensus, take for example free trade, it has even stronger support among economists than this and it’s one of the largest consensuses in econ. Yet you can easily find some papers that challenge it even in good journals. One or two papers don’t necessarily overturn consensus unless they offer very solid empirical evidence, the paper you link  
> **username_1**: Does not even claim wealth tax is efficient, it just says with better enforcement it is *possible* to have it without it quickly collapsing, but it does not even deal with issues of efficiency. Even people like Atkinson were generally opposed to the idea. I think it’s fair to say that most mainstream economists consider it bad idea irrespective of their ideological leaning  
> **username_2**: I understand and you provide good evidence of your assertion, I just think its a bit too strong. As you mention, the poll has a lot of non-response. The main issues raised by papers, such as being difficult to implement and not raising lots of revenue are being reviewed with new papers on ways to make them more effective (like the one I mentioned). And all the issues with inefficiency - capital taxes have very similar issues and we still have them in most countries. So that's not conclusive to me that the tax is a bad idea as a consensus, becusue all taxes are a bad idea for efficiency.  
> **username_2**: Its just a bit strong to say its a consensus, when you mention that we have 2 of the leading economists in the world on public finance, Saez and Zucman, being proponents of it. They are not just "some mainstream" economists, they some of the most important researchers who are shaping the field. Even if they argue for a few percentage points, it doesn't mean the tax as a whole should not be there. Many say that capital gains tax should also be small for similar reasons, but we still have it.  
> **username_1**: @username_2 1. But even Z&S consider the European wealth taxes failures. Note if you read that para I am talking about past wealth tax examples. 2. In the second part of my answer which is not about past experience I do not have such strong statement. 3. In addition even Z&S are still quite cautious about them. 4.  Wealth taxes have much larger issues than burden shifting which was the main argument against capital taxes. In addition, we also used to have wealth taxes in EU and they were not abolished because of some right wing radicals getting elected all over Europe  
> **username_1**: but because they were utter failures, sure technology solves some issues about valuation problem but doesn't fix other issues that are more serious.  
> **username_2**: Yes, but my point is, your overall conclusion of both parts is that there is a consensus currently on whether wealth taxes can work or not going forward, in general, among academics. Give the 2nd part of your post, I don’t think it’s a warranted overall conclusion, regardless of past failures, because research is evolving on how to improve on past experiences. I think you can nuance a bit between consensus on past experiences and consensus on current policy going forward, that’s all.  
> **username_2**: Its just, as is, if I read your post as a layperson, I would get the impression that a vast majority of economists currently would say to a policymaker that wealth taxes cannot work in any country under any circumstance. I think that’s misleading. From my experience in this field for about 8 years, I just don’t think its a clear consensus among most people, for example, at current international conferences. Especially the younger generation led by Saez. I’ll leave it at that.  

---

