Institute for Research in Economic and Fiscal issues

IREF Europe - Institute for Research in Economic and Fiscal issues

Fiscal competition
and economic freedom


An Economic Rationale for the Net Wealth Tax - Does It Exist?

Abstract: This paper surveys possible motivations 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 the existence of net wealth taxes is better explained with imperfections of collective decision-making than with economic rationality.

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