A Wealth Tax at Work (2024)

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Volume 68 Issue 4 December 2022
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Thor O Thoresen

Research Department, Statistics Norway

, Oslo, Norway

Department of Economics, University of Oslo

, Oslo,

Norway

E-mail: tot@ssb.no (corresponding author); oen@ssb.no

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,

Marius A K Ring

Finance Department, University of Texas at Austin

, Austin, TX,

USA

. E-mail: mariuskallebergring@gmail.com

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,

Odd E Nygård

Research Department, Statistics Norway

, Oslo, Norway

E-mail: tot@ssb.no (corresponding author); oen@ssb.no

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CESifo Economic Studies, Volume 68, Issue 4, December 2022, Pages 321–361, https://doi.org/10.1093/cesifo/ifac009

Published:

22 October 2022

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Abstract

Over the past decade, the question of whether and, in the event, how to tax household wealth has risen to the forefront of policy debates across the world. As Norway belongs to only a handful of countries that (still) levy an annual net wealth tax, we use the Norwegian example to review the case for annual taxation of wealth. Our discussion benefits from the use of rich administrative data, enabling us to provide a comprehensive set of empirical facts that are useful in assessing the merits of wealth taxation. We consider some of the central issues in the wealth tax debate: how the taxation of wealth fits in with personal income tax, distortionary effects, redistributional effects, and the extent to which wealth taxation may cause adverse liquidity effects for private firms. Taken together, we consider that the evidence presented here does not weaken the case for maintaining the tax in the Norwegian case: we find favorable distributional effects and efficiency losses appear to be limited (JEL codes: H21, H23, H25, and H31).

© The Author(s) 2022. Published by Oxford University Press on behalf of Ifo Institute, Munich. All rights reserved. For permissions, please email: journals.permissions@oup.com

This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/pages/standard-publication-reuse-rights)

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FAQs

What is a wealth tax quizlet? ›

Wealth taxes are those taxes levied on the value of property owned by a taxpayer. Examples include real estate taxes, tangible taxes, intangible taxes, and inventory taxes. Wealth transfer taxes are those taxes levied on the value of property transferred to another. Examples are the gift, estate, and inheritance taxes.

What is the argument for the wealth tax? ›

A Wealth Tax Would Raise Revenues

Another argument made in favor of a wealth tax is that it could raise substantial revenues to address the daunting outlook for the deficit or provide funding for other initiatives.

What is wealth tax in simple terms? ›

A wealth tax is a tax based on the market value of assets owned by a taxpayer. Some developed countries choose to tax wealth, although the United States has historically relied on taxing annual income to raise revenue.

What is the 25 wealth tax? ›

To finally address this glaring inequity, the President's Budget includes a 25 percent minimum tax on the wealthiest 0.01 percent, those with wealth of more than $100 million. Increases the Top Tax Rate on the Wealthiest Americans to 39.6 Percent.

How do wealth taxes work? ›

How Does It Work? Wealth taxes work by applying a tax rate to an individual's net wealth, usually above a certain threshold. A person with $2.5 million in wealth and $500,000 in debt would have net wealth of $2 million.

What is a wealth tax example? ›

Generally, a wealth tax works by taxing a person's net worth, rather than the income they earn in a given year. In countries that impose a wealth tax, the tax is only levied once assets reach a certain minimum threshold. In Norway, for instance, the net wealth tax is 0.85% on stocks exceeding $164,000 USD in value.

Is wealth tax a good thing? ›

Another reason some favor a wealth tax is inequality. Wealth is more concentrated among higher income households than is income. For those who want higher income households to pay a larger share of taxes than other households, a wealth tax would accomplish this goal.

How would a wealth tax hurt the economy? ›

The revenue collected will fall short of expectations. Worse, the tax will damage the economy. Today's ablest entrepreneurs will be forced to devote their time to defending their fortunes against the predation by the one or more states that lay claim to their wealth.

What was the significance of the wealth tax Act? ›

The Revenue Act of 1935 introduced the Wealth Tax, a new progressive tax that took up to 75 percent of the highest incomes. Many wealthy people used loopholes in the tax code. The Revenue Act of 1937 cracked down on tax evasion by revising tax laws and regulations.

What is the new wealth tax? ›

Come Jan. 1, 2026, the state would tax wealth that exceeds $50 million at a rate of 1% each year, with an additional 0.5% tax on assets valued at more than $1 billion. Part-time residents would be taxed on a pro rata share of their wealth based on the number of days they spend annually in California.

What is the one time wealth tax? ›

'Capital levies' or 'one-off wealth taxes' involve a one-time charge based upon wealth, normally assessed across a broad range of asset classes (such as savings, investments, property and pensions).

Is a wealth tax legal? ›

Under this interpretation, the Constitution allows Congress to enact an unapportioned wealth tax but would still require apportionment for some other forms of taxes, such as a tax on real estate alone.

What is the difference between income tax and wealth tax? ›

Wealth taxes are levied on the wealth stock on an accrual basis, while income taxes are levied on the flow from the wealth stock.

What are the 3 main types of taxes? ›

progressive tax—A tax that takes a larger percentage of income from high-income groups than from low-income groups. proportional tax—A tax that takes the same percentage of income from all income groups. regressive tax—A tax that takes a larger percentage of income from low-income groups than from high-income groups.

What is the definition of wealth quizlet? ›

Wealth: refers to all of a person's or families material assets including income, property ownership, stocks, inheritance etc.

What was the wealth tax in the Great Depression? ›

The Revenue Act of 1935 put a new progressive tax, the Wealth Tax, in place. Those making more than $5 million a year were taxed up to 75 percent. Unlike their Civil War grandparents, the wealthy were not happy to pay income taxes during crisis times. Loopholes in the tax code were used.

When was the wealth tax? ›

The Revenue Act of 1935 introduced the Wealth Tax, a new progressive tax that took up to 75 percent of the highest incomes.

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