Experts: Wealth Tax on Super Rich Not the Best Solution
While US states like California consider a wealth tax on billionaires, many experts argue that closing existing tax loopholes is more effective than introducing a new tax on wealth.
California voters will decide in November whether to impose a one-time 5% tax on fortunes exceeding $1 billion. This move reflects growing public frustration that billionaires do not pay their fair share of federal taxes. However, analysts point out that wealth taxes are complex and have been abandoned by many developed countries.
Currently, only three OECD countries—Norway, Spain, and Switzerland—collect recurrent wealth taxes, and none except Switzerland raise more than 1% of GDP. In 1990, 12 countries had such taxes. Key problems include asset valuation, capital flight, and discouraging entrepreneurship.
A more effective way to increase revenue is to restore the estate tax, which has been significantly weakened in the US over the past 25 years. In 1972, 6.5% of decedents paid estate taxes; by 2021, that share had fallen to less than 0.1%. Revenue dropped from 0.4% to 0.08% of GDP. Restoring rates and reducing exemptions could bring substantial revenue.
Other solutions include raising the capital gains tax from 20% closer to 37% (the top rate on labor income), restoring the corporate tax rate to pre-Trump levels (35%), and closing the tax gap, which could yield an additional $7.5 trillion over 2020-2029.
While directly taxing the wealth of billionaires may seem appealing, experts warn it could distract from proven methods. Fixing the tax system by closing loopholes and broadening the base is more effective and less risky.
