Some countries are looking at wealth taxes to raise revenue from the superrich to help fill budgets or compensate for growing social inequality – Image: Jens Kalaene/dpa/picture alliance
Growing income inequality and public displays of billionaire power are increasing calls for a new income and wealth tax aimed at the world’s richest individuals. Can wealth ever be taxed fairly?
Not many people enjoy paying taxes. But many voters don’t see a problem taxing the superrich and making them pay their “fair share.”
One way is to increase income taxes. There’s also the option for an annual or one-off wealth tax on everything someone has above a certain mark.
A few governments want to tax extreme wealth to lower taxes on a stagnating middle class or to make up for social inequality. Others want to fill budget holes.
Still others argue philosophically that excessive wealth should be limited since it no longer adds to the well-being of those individuals.
Calls to raise US income taxes
The definition of rich is in the eye of the beholder. But generally, ultra-high-net-worth individuals have at least $30 million (€25.9 million) in investable assets, while the superrich have $300 million or more.
US Senator Elizabeth Warren proposed an ‘ultra-millionaire tax’ on holdings above $50 million during the 2019 presidential race – Image: Charles Krupa/AP Photo/picture alliance
In the US, Mitt Romney, a former Massachusetts governor, senator and US presidential candidate, sees a big problem with capital gains loopholes.
“We have reached a point where any mix of solutions to our nation’s economic problems is going to involve having the wealthiest Americans contribute more,” he wrote in a guest essay titled “Tax the Rich, Like Me” in the New York Times in December 2025.
Zohran Mamdani, New York City’s new mayor, has proposed increasing the city’s income tax rate from 3.9% to 5.9% on income over a million dollars annually.
At the beginning of March, lawmakers in the state of Washington passed a new tax on personal income over $1 million. The measure is waiting for the governor’s signature. Others are considering similar measures.
These proposals matter because the US is the biggest economy in the world. It is also home to the most millionaires and billionaires, according to Forbes calculations.
Who’s afraid of a little tax?
“Taxing the superrich is fair, economically efficient and in some countries furthers other important goals, such as enhancing democracy,” said Brian Galle, a law professor at University of California Berkeley Law School, who specializes in taxation.
In many countries, the superrich control such a big share of social resources that they can command political and economic outcomes, says Galle, which can lead to unhealthy politics and catastrophic economic outcomes.
One major hurdle to taxing the superrich is part of the existing tax systems since most impose taxes only when investment assets are sold, says Galle.
“Superrich households can afford the luxury of selling only a small share of their wealth, allowing them to choose when and often where to pay tax,” he added.
Last year, Forbes counted 3,028 billionaires worldwide worth a combined total of $16.1 trillion (€13.5 trillion) in assets – Image: Burkhard Schubert/Geisler-Fotopress/picture alliance
Who’s afraid of a little wealth tax?
Instead of an income tax, what about adding up all assets and then taxing that number: A wealth tax.
Since 1965, 13 OECD countries have imposed a net wealth tax, according to Cristina Enache and Alex Mengden, economists at the Tax Foundation, a nonprofit tax‑policy think tank.
Today, only four countries still have a wealth tax, among them Norway, Spain and Switzerland.
Overall, the taxes brought in little revenue and caused administrative headaches, say Enache and Mengden. Another problem was legal challenges.
The German Constitutional Court ruled in 1995 that the country’s wealth tax ran afoul of the principle of equality and declared it unconstitutional. As a result, Germany suspended the levy in 1997.
The Dutch Supreme Court ruled in 2021 that its country’s wealth tax violated European law regarding property rights and non-discrimination.
Wealth taxes are hard to calculate
When it comes to wealth taxes, a big problem is tallying someone’s wealth.
Cash is easy to count, but what about all those homes, cars, private jets and investments? Not to mention art collections or the contents of safety deposit boxes. This becomes more difficult and costly if it needs to be done every year.
A wealth tax disincentivizes saving and investing, hurting entrepreneurship in the long run, according to research by the Tax Foundation.
Elon Musk tops the Forbes Real-Time Billionaires List with a reported $836 billion in assets. In all, 19 people on the list have over $100 billion – Image: Markus Schreiber/AP Photo/picture alliance
Additionally, a wealth tax “could lead to capital flight and wealthy individuals relocating to neighboring jurisdictions,” said Mengden and Enache. “After a 0.1 percentage point increase in Norway’s wealth tax, the country saw an exodus of high-net-worth individuals to countries like Switzerland and the UK.”
UC Berkeley’s Brian Galle is less convinced that the ultrarich can simply move their wealth rather than allow it to be taxed. “Good legal design, for example, can make it much more difficult for wealthy investors to escape tax,” said Galle.
Can California show the way?
When it comes to a new wealth tax, California may be showing the way with a one‑time tax of 5% on people worth more than $1 billion.
If it ends up on the November ballot, it will be a major test for a major economy. In 2024, strong growth made the state the fourth largest economy in the world behind the US as a whole, China and Germany.
Supporters say the tax will raise revenue. Critics say it will drive out the rich who will relocate to Texas, Florida or Nevada.
Governor Gavin Newsom is against the idea, as are tech leaders and likely many of the state’s roughly 200 billionaires. Their biggest worry is that the tax takes illiquid wealth and unrealized gains into account.
That means theoretical “paper gains” on stocks or property would be taxed. Alarmists fear this could force some people to sell their homes or controlling stakes in companies they founded just to pay their tax bill.
Governments have plenty of levers when it comes to taxation, but they need to be used wisely if the goal is to make everyone pay their fair share.
DW.com/NAN 13 April 26
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