A wealth tax packs a powerful fiscal punch

The pandemic has created economic turmoil in essentially every country. Due to the collapse in economic activity, many believe that government intervention could be the saving grace. This revelation has led politicians and policymakers to consider increasing taxes. 

Now is the best time to think about the best way to tax. The Wealth Tax Commission recently published its final report in conjunction with a series of background evidence papers. Within the reports is contained history and theoretical motivations in favor and against net wealth taxes. Apparently, the information in the reports is critical that countries cannot afford to avoid it. 

In regard to wealth taxes, Martin Sandbu stated, “[I]n most rich countries, wealth is distributed so that if the threshold for paying wealth taxes is set to include just the wealthiest 10 per cent of the population (with no tax on wealth below that threshold), the taxable wealth amounts to about 2 to 2.5 times annual gross domestic product. In other words, a 1 per cent tax on wealth above the amount that gets you into the wealthiest tenth should raise 2 per cent to 2.5 per cent of GDP, before any losses due to avoidance and evasion.” 

Sandbu claims that the wealth tax presents a great potential for revenue and should be considered. 

See Martin Sandbu, A wealth tax packs a powerful fiscal punch, Financial Times (U.K.) 

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.