The economics of a wealth tax

Stuart Adam and Helen Miller

Wealth and Policy, Working Paper 103

30 Oct 2020

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This paper asks when a wealth tax would be desirable in principle, setting aside the practicalities and politics that would be crucial in reality. If a wealth tax were unexpected and credibly one-off, it would be an efficient way to raise revenue and could be used to address existing wealth inequality, although whether it would be desirable hinges on whether it is considered fair. Making the case for an annual wealth tax, which would affect future wealth accumulation as well as existing wealth, is less straightforward. It requires explaining why it is better to tax the same wealth every year rather than taxing all sources of wealth once when they are received (and/or when they are spent). The theoretical arguments probably justify some taxation of wealth in principle, though it is questionable whether the achievable benefits outweigh the costs of an imperfect wealth tax in practice.

DOI: 10.47445/103
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