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The economics of taxing net wealth: A survey of the issues

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Listed author(s):
  • Schnellenbach, Jan

Abstract

This paper surveys possible motivations for having a net wealth tax. After giving a short overview over the state of wealth taxation in OECD countries, we discuss both popular arguments for such a tax, as well as economic arguments. It is argued that classical normative principles of taxation known from public economics cannot give a sound justification for a net wealth tax. The efficiency-related effects are also discussed and shown to be theoretically ambiguous, while empirical evidence hints at a negative effect on GDP growth. Finally, it is argued that despite of widespread and persistent lobbying for a revitalization of the net wealth tax, this is unlikely to happen due to political economy constraints.

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File URL: https://www.econstor.eu/bitstream/10419/67482/1/732096707.pdf
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Paper provided by Walter Eucken Institut e.V. in its series Freiburg Discussion Papers on Constitutional Economics with number 12/5.

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Date of creation: 2012
Handle: RePEc:zbw:aluord:125
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Keywords: net wealth tax; wealth; inequality; redistribution;

Find related papers by JEL classification:

  • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
  • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
  • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
  • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
  • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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  1. James A. Yunker, 2010. "Capital wealth taxation as a potential remedy for excessive capital wealth inequality," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 33(1), pages 83-104, October.
  2. Stefania Albanesi & Christopher Sleet, 2006. "Dynamic Optimal Taxation with Private Information," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 1-30.
  3. Schmidheiny, Kurt, 2006. "Income segregation and local progressive taxation: Empirical evidence from Switzerland," Journal of Public Economics, Elsevier, vol. 90(3), pages 429-458, February.
  4. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2011. "Top Incomes in the Long Run of History," Journal of Economic Literature, American Economic Association, vol. 49(1), pages 3-71, March.
  5. Narayana R. Kocherlakota, 2005. "Zero Expected Wealth Taxes: A Mirrlees Approach to Dynamic Optimal Taxation," Econometrica, Econometric Society, vol. 73(5), pages 1587-1621, 09.
  6. Binmore, Ken & Shaked, Avner, 2010. "Experimental Economics: Where Next? Rejoinder," Journal of Economic Behavior & Organization, Elsevier, vol. 73(1), pages 120-121, January.
  7. Hansson, Åsa, 2005. "The Wealth Tax and Entrepreneurial Activity," Working Papers 2005:43, Lund University, Department of Economics.
  8. Peter Birch Sørensen, 2007. "Can Capital Income Taxes Survive? And Should They?," CESifo Economic Studies, CESifo, vol. 53(2), pages 172-228, June.
  9. Binmore, Ken & Shaked, Avner, 2010. "Experimental economics: Where next?," Journal of Economic Behavior & Organization, Elsevier, vol. 73(1), pages 87-100, January.
  10. Aaron, Henry J. & Munnell, Alicia H., 1992. "Reassessing the Role for Wealth Transfer Taxes," National Tax Journal, National Tax Association, vol. 45(2), pages 119-43, June.
  11. Bruno S. Frey, 2008. "Happiness: A Revolution in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062771, July.
  12. Asa Hansson, 2008. "The Wealth Tax and Entrepreneurial Activity," The Journal of Entrepreneurship, Entrepreneurship Development Institute of India, vol. 17(2), pages 139-156, September.
  13. Schaltegger, Christoph A. & Somogyi, Frank & Sturm, Jan-Egbert, 2011. "Tax competition and income sorting: Evidence from the Zurich metropolitan area," European Journal of Political Economy, Elsevier, vol. 27(3), pages 455-470, September.
  14. Jukka Pirttilä & Roope Uusitalo, 2010. "A 'Leaky Bucket' in the Real World: Estimating Inequality Aversion using Survey Data," Economica, London School of Economics and Political Science, vol. 77(305), pages 60-76, 01.
  15. Keith G. Banting, 1991. "The Politics of Wealth Taxes," Canadian Public Policy, University of Toronto Press, vol. 17(3), pages 351-367, September.
  16. Harms, Philipp & Zink, Stefan, 2003. "Limits to redistribution in a democracy: a survey," European Journal of Political Economy, Elsevier, vol. 19(4), pages 651-668, November.
  17. Stefan Homburg, 1999. "Competition and Co-ordination in International Capital Income Taxation," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 56(1), pages 1-17, March.
  18. Vanberg, Viktor J., 2005. "Market and state: the perspective of constitutional political economy," Journal of Institutional Economics, Cambridge University Press, vol. 1(01), pages 23-49, June.
  19. Nico A. Hansen & Anke S. Kessler, 2001. "The Political Geography of Tax H(e)avens and Tax Hells," American Economic Review, American Economic Association, vol. 91(4), pages 1103-1115, September.
  20. Hans Peter Gruner & Giacomo Corneo, 2000. "Social Limits to Redistribution," American Economic Review, American Economic Association, vol. 90(5), pages 1491-1507, December.
  21. Aaron, Henry J. & Munnell, Alicia H., 1992. "Reassessing the Role for Wealth Transfer Taxes," National Tax Journal, National Tax Association, vol. 45(2), pages 119-143, June.
  22. Ihori, Toshihiro, 2001. "Wealth taxation and economic growth," Journal of Public Economics, Elsevier, vol. 79(1), pages 129-148, January.
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Cited by:

  1. Paul Eckerstorfer & Johannes Halak & Jakob Kapeller & Bernhard Schütz & Florian Springholz & Rafael Wildauer, 2014. "Die Vermögensverteilung in Österreich und das Aufkommenspotenzial einer Vermögenssteuer," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 40(1), pages 63-81.

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