Sen. Elizabeth Warren is once again pushing for Congress to adopt a so-called “wealth tax” on “ultra-millionaires.” The policy is similar to existing real-estate taxes, but instead of simply applying to a home, the tax would be levied onto the net value of a person’s assets. The scheme could encompass houses, investments, cars, boats, fine art, and more.
Predictably, the idea has failed in nearly every country that has tried to implement it. More affluent residents react to a wealth tax by simply leaving the country, which diminishes the overall tax base and leads to less government revenue overall. The policy would also suppress business investment, which drives job creation and innovation.
But that hasn’t stopped countries from experimenting with the bad idea.
Norway, Spain and Switzerland currently levy a wealth tax on some citizens. For example, Norway collects 0.85 percent of an individual’s wealth if the value of their assets surpass $170,000. Spain’s wealth tax ranges from 0.2 percent to 3.75 percent, depending on the net worth of an individual. And France had a wealth tax up until 2018 when it was repealed.
A wealth tax may seem like a good strategy to raise more government revenue on paper. But in the end, the negative effects far outweigh the supposed benefits. Lawmakers who support the idea in the U.S. should rethink their position.