Democrats are busy finding new ways to tax the rich. The most straightforward way to do that -- an annual tax on household wealth -- is an idea with deep roots in Europe that several 2020 hopefuls are hoping to import to the U.S.
Yet of the 15 European countries that tried a wealth tax in recent years, only four still employ it. Most of those governments ultimately were underwhelmed by the amount of revenue raised and overwhelmed by the difficulty in collecting an accurate tax.
Nevertheless, the idea is gaining steam among Democrats trying to unseat President Donald Trump in 2020. Senator Elizabeth Warren of Massachusetts was the first to come out with a detailed wealth tax proposal, and former Texas congressman Beto O’Rourke has expressed support for the concept.
Warren wants to impose a 2 percent annual tax on a family’s wealth over $50 million, with an additional surcharge of 1 percent on wealth above $1 billion. She says her plan would raise $2.75 trillion over 10 years.
“As long as there is a desire to tax, there’s a chance a wealth tax could happen here,” said Veronique de Rugy, a senior fellow at the conservative Mercatus Center. But “we can’t assume we can do things better than other countries who have tried.”
Democrats, seizing on the argument that the 2017 Republican tax overhaul favored the wealthy, are staking out positions that will require upper-income filers to pay more. In addition to wealth tax proposals, several contenders have floated ideas to increase the number of filers eligible for the estate tax.
Some 15 countries in the Organization for Economic Cooperation and Development, a group of economically advanced nations, had wealth taxes in 1995. Now, only four do: Switzerland, Belgium, Norway and Spain.
Of the wealth taxes that remain, Switzerland’s is the most prominent. Its tax is levied by the canton, or state government, and at the city level. Each local government sets is own rates and includes most assets -- property, securities, vehicles, and valuables, such as jewelry.
Others are less vigorous.
Spain briefly halted the tax during the financial crisis in 2008, then reinstated it in 2011, and increased the thresholds at which it applies. Similarly, Norway increased taxes elsewhere to generate more revenue and its wealth tax now only comprises 0.8 percent of its tax base.