Wealth Tax

A wealth tax, or net wealth tax, is a tax charged every year on the total value of what a person or household owns, after subtracting what they owe. The base can include shares, bonds, bank deposits, property, business interests, art and other valuables. Most designs apply only above a high threshold, so they are aimed at the richest households rather than the middle class.

A wealth tax differs from other taxes on wealth that apply only at a particular moment. Capital gains tax is charged when an asset is sold at a profit, inheritance tax when wealth is passed on at death, and property taxes only on land and buildings. A net wealth tax applies to the whole balance sheet each year. It has become one of the most argued-over ideas in tax policy, tied to wider debates about economic inequality.

Most taxes follow money as it moves: when someone is paid, spends or sells. A wealth tax instead looks at what someone has, like taking stock of a warehouse once a year. The value of everything owned is added up, debts such as a mortgage are subtracted, and a small percentage of what is left over a set threshold is paid to the government.

Because the rate is small, often around one or two percent, the yearly bill can look modest. But it is paid every year, so over time it can take a large share of the income that the wealth earns, especially in years when investments do poorly.

A simple single-rate wealth tax is:

• $T$ is the tax due for the year.
• $A$ is the market value of taxable assets on the valuation date.
• $D$ is the value of debts that can be deducted.
• $E$ is the exempt threshold, and $t$ is the tax rate.

For example, a household with $60 million of assets and $10 million of debts has net wealth of $50 million. With a $20 million threshold and a 2% rate, the tax is $0.02 \times (60 - 10 - 20) = 0.6$, or $600,000. If the assets earn a 4% return, or $2.4 million, the tax equals a quarter of that return, which shows why economists compare wealth taxes with taxes on capital income.

Many proposals use progressive bands, with higher rates on larger fortunes. Real systems also need rules for valuing unlisted businesses and art, exemptions for pensions or the main home, and caps that limit the combined income and wealth tax.

Wealth taxes were once common in Europe. According to the OECD, 12 of its member countries levied individual net wealth taxes in 1990, but only four did by 2017, after countries including Austria, Denmark, Germany, the Netherlands, Finland and Sweden dropped theirs. France replaced its general wealth tax with a tax on real estate wealth in 2018. As of 2026, the OECD members with a broad net wealth tax are:

• Switzerland. Cantons levy annual wealth taxes at varying rates, and they raise a larger share of revenue than in other countries.
• Norway. A combined municipal and national tax applies at around 1% to 1.1% of net wealth above a threshold. Increases in 2022 were followed by reports of wealthy Norwegians moving to Switzerland.
• Spain. Regions administer a wealth tax, and a national "solidarity" tax on large fortunes, introduced in 2022, applies to net wealth above €3 million, limiting regions' ability to cut their rates to zero.
• Colombia. A recurring tax on large net wealth was made permanent by a 2022 reform.

US politicians including Elizabeth Warren and Bernie Sanders proposed federal wealth taxes in their 2020 presidential campaigns, though critics argued such a tax might be unconstitutional as a "direct tax" not apportioned among states. In 2024 Brazil, as G20 chair, commissioned the economist Gabriel Zucman to design a coordinated minimum tax of 2% on the wealth of billionaires; G20 finance ministers agreed only to cooperate on taxing very wealthy individuals effectively. In France, a "Zucman tax" of at least 2% on fortunes over €100 million was rejected by the National Assembly in October 2025.

Supporters argue that the very wealthy often have little taxable income relative to their fortunes, because unrealized gains are not taxed, so a wealth tax reaches what income tax misses. They see it as a way to limit concentrated economic and political power, to slow the build-up of generational wealth and to raise revenue for public goods. Some economists add that taxing idle wealth pushes owners toward more productive uses.

Opponents point to Europe's experience: wealth taxes raised little, were costly to administer and encouraged capital flight, avoidance and emigration of wealthy residents to lower-tax countries, part of a wider pattern of tax competition. Valuing private businesses is hard, and owners rich in assets but short of cash may have to sell shares or borrow to pay. Critics also argue the tax discourages saving and investment and can exceed 100% of the real return in low-return years. Some economists prefer reforming taxes on gains, inheritances and land instead, or relying on international exchange of information such as the Common Reporting Standard to make existing taxes harder to escape.

• OECD: The Role and Design of Net Wealth Taxes in the OECD