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The Economics of Taxing Net Wealth: A Survey of the Issues

Author: JAN SCHNELLENBACH
Published in PFM, Vol. 12 No. 4

This paper surveys possible motivations for 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 cannot give a sound justification for a net wealth tax. The efficiency-related arguments 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 despite of widespread and persistent lobbying for a revitalization of the net wealth tax, this is unlikely to happen due to political economy constraints.

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