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Does a Progressive Wealth Tax Reduce Top Wealth Inequality? Evidence from Switzerland

Author

Listed:
  • Samira Marti
  • Isabel Martínez
  • Florian Scheuer
  • Isabel Z. Martínez

Abstract

Like in many other countries, wealth inequality has increased in Switzerland over the last fifty years. By providing new evidence on cantonal top wealth shares for each of the 26 cantons since 1969, we show that the overall trend masks striking differences across cantons, both in levels and trends. Combining this with variation in cantonal wealth taxes, we then estimate an event study model to identify the dynamic effects of reforms to top wealth tax rates on the subsequent evolution of wealth concentration. Our results imply that a reduction in the top marginal wealth tax rate by 0.1 percentage points in-creases the top 1% (0.1%) wealth share by 0.9 (1.2) percentage points five years after the reform. This suggests that wealth tax cuts over the last 50 years explain roughly 18% (25%) of the increase in wealth concentration among the top 1% (0.1%).

Suggested Citation

  • Samira Marti & Isabel Martínez & Florian Scheuer & Isabel Z. Martínez, 2023. "Does a Progressive Wealth Tax Reduce Top Wealth Inequality? Evidence from Switzerland," CESifo Working Paper Series 10317, CESifo.
    • Handle: RePEc:ces:ceswps:_10317
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    References listed on IDEAS

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    1. Florian Scheuer & Joel Slemrod, 2021. "Taxing Our Wealth," Journal of Economic Perspectives, American Economic Association, vol. 35(1), pages 207-230, Winter.
    2. Kurt Schmidheiny & Sebastian Siegloch, 2023. "On event studies and distributed‐lags in two‐way fixed effects models: Identification, equivalence, and generalization," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(5), pages 695-713, August.
    3. Marius Brülhart & Jonathan Gruber & Matthias Krapf & Kurt Schmidheiny, 2022. "Behavioral Responses to Wealth Taxes: Evidence from Switzerland," American Economic Journal: Economic Policy, American Economic Association, vol. 14(4), pages 111-150, November.
    4. Katrine Jakobsen & Kristian Jakobsen & Henrik Kleven & Gabriel Zucman, 2020. "Wealth Taxation and Wealth Accumulation: Theory and Evidence From Denmark," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(1), pages 329-388.
    5. David Seim, 2017. "Behavioral Responses to Wealth Taxes: Evidence from Sweden," American Economic Journal: Economic Policy, American Economic Association, vol. 9(4), pages 395-421, November.
    6. Brülhart, Marius & Parchet, Raphaël, 2014. "Alleged tax competition: The mysterious death of bequest taxes in Switzerland," Journal of Public Economics, Elsevier, vol. 111(C), pages 63-78.
    7. Florian Scheuer & Joel Slemrod, 2020. "Taxation and the Superrich," Annual Review of Economics, Annual Reviews, vol. 12(1), pages 189-211, August.
    8. José María Durán-Cabré & Alejandro Esteller-Moré & Mariona Mas-Montserrat, 2019. "Behavioural responses to the (re)introduction of wealth taxes. Evidence from Spain," Working Papers 2019/04, Institut d'Economia de Barcelona (IEB).
    9. Atkinson, A. B. & Piketty, Thomas (ed.), 2007. "Top Incomes Over the Twentieth Century: A Contrast Between Continental European and English-Speaking Countries," OUP Catalogue, Oxford University Press, number 9780199286881.
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    Cited by:

    1. Roberto Iacono & Bard Smedsvik, 2023. "Behavioral responses to wealth taxation: evidence from a Norwegian reform," Working Papers halshs-04423923, HAL.

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    More about this item

    Keywords

    wealth tax; inequality; top wealth shares;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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