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Jon Greenberg
By Jon Greenberg May 10, 2019

Skeptic of Elizabeth Warren's plan says 10 European countries scrapped wealth taxes

Elizabeth Warren pins a lot of hopes on her ultra-millionaire tax. The Democratic presidential candidate would like to put a 2% levy on assets over the $50 million mark, and 3% on those over $1 billion. The revenues would pay for her plans to pay for universal child care, student debt forgiveness and other programs she has in mind.

In a Fox News op-ed, an analyst at the conservative Heritage Foundation noted that a wealth tax isn’t a new idea. Joel Griffith said many European nations have tried it.

And scrapped it.

"Of the 14 wealthy (Organization for Economic Cooperation and Development) countries with a wealth tax in 1996, 10 have since then abandoned it," Griffith wrote April 28.

We found different numbers, but there has been a turn away from wealth taxes. And with Warren’s plan on the table, the European experience is worth exploring.

A decline in Europe

Griffith got his numbers from an article on the website of the Tax Foundation, a group that is concerned about the ways that taxes distort business decisions. The foundation’s analysis drew on data from the Organization for Economic Cooperation and Development, a Paris-based international body that has its roots in the post-war recovery of Europe.

The OECD data shows 13 countries collected revenues from net wealth taxes in 1996, measured in local currency. But it shows 14 when measured as a percentage of GDP. We can’t account for the difference.

There’s another twist. One of those countries is Austria, but Austria ended its wealth tax in 1994. So the actual count that year was either 12 or 13. (It’s only slightly off from what Griffith wrote, but we care about these details.)

Tallying the countries that have a wealth tax today is even trickier, largely because definitions vary. We found room for debate over what constitutes a wealth tax.

All wealth taxes tax things that are owned, not money earned, but they vary in a couple of key respects. They might target the wealthy (Norway’s tax, for example, affects net worth above 1.48 million Norwegian Kroner) or a broader swath of residents. And some tax all assets, while others — such as Belgium with stocks and bonds, or France with real estate — focus only on specific assets.

A 2018 report from the respected German-based think tank Ifo Institute for Economic Research counted just three countries with a wealth tax: Switzerland, Norway and Spain. But the authors noted that Italy and the Netherlands also tax wealth in limited ways, and France swapped a broad wealth tax for a narrow one on real estate wealth that kicks in on property worth at least 1.3 million Euros.

The international accounting firm Ernst and Young affirmed that Italy does have a wealth tax.

Another accounting firm KPMG reported in 2018 that Belgium added a wealth tax when it imposed a tax on securities, such as stocks and bonds. To make things even more complicated, some OECD countries dropped, added, or changed their wealth taxes since 1996.

The Tax Foundation article Griffith relied on said that today, six OECD countries had wealth taxes in one form or another. (One of its charts showed four, but that stopped counting in 2017.)

How to sort this out?

By the strictest definition, today only three wealthy OECD countries have a wealth tax. With a looser standard, as many as seven do. (Some tallies include Hungary, but it might not count as a "wealthy" country, as the claim says.)

Low revenues, big administrative headaches

The general reason European countries dropped their wealth taxes was they were more trouble than they were worth. In Germany, the tax was found unconstitutional, but it wasn’t raising that much money anyway.

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A review of the wealth tax option by the European Commission said that in the past, determining the value of assets was challenging and cheating was easier.

"Opportunities of avoidance and evasion reduce the capacity of wealth taxes to generate revenue, and they contribute to the perception that wealth taxes produce little net benefit," the report said.

"Decisions to repeal net wealth taxes have often been justified by efficiency and administrative concerns," OECD analysts wrote in a 2018 report. "The revenues collected from net wealth taxes have also, with a few exceptions, been very low."

Switzerland reaps far more than other nations, taking in revenues equal to 1% of GDP. But Norway brings in 0.4% and Spain 0.2%. Of the countries that did away with a wealth tax, Denmark was typical. In 1996, the tax brought in just 0.1% of GDP.

The earlier taxes also tended to reach down into the middle class, not just the uber-rich. Getting rid of them was politically popular.

A debate over the lessons from Europe

For some, the European experience casts a deep shadow over Warren’s proposal.

Wojciech Kopczuk, an economist at Columbia University, warned that no matter what, valuing assets is tough.

"(Warren’s) plan would apply only to the very rich," Kopczuk said. "That does not at all resolve administrative problems. Those are as daunting in the United State as in Europe."

On the other hand, Kopczuk added that a tax that starts at $50 million could hold popular support.

There’s also a difference in overall tax regimes. The OECD analysts said that the arguments for and against a wealth tax depend on all the other tax laws in a given country.

In that light, Reuven Avi-Yonah, director of the international tax program at the University of Michigan Law School, said Europe is not at all like America.

"Income tax rates and sometime inheritance taxes are higher in Europe," Avi-Yonah said. "This means there is less need to tax the rich through a wealth tax."

We’ve looked before at the debate whether Warren’s plan would raise as much as she hopes.

Warren’s campaign staff told us that they have learned the lessons from Europe. They argue that focusing on the 76,000 wealthiest people and taxing all assets with no complicating exceptions would lighten the administrative burden.

There’s also a hint that Europe is taking a second look at wealth taxes. Both the OECD and the European Commission wrote of a "renewed interest in wealth taxation."

Our ruling

Griffith said that "of the 14 wealthy OECD countries with a wealth tax in 1996, 10 have since then abandoned it."

We found there are different ways to consider wealth taxes, and Griffith used the strictest one based on dated information. We found that either 12 or 13 countries had a wealth tax in 1996, and nine ended their taxes since then. Today, six or seven European nations have some form of a wealth taxes, either broad ones or narrow ones.

The meaning of the European experience from two decades ago is debatable, but that’s not the basis for our ruling. We looked only at the countries and their tax laws.

The numbers in the statement are off. European countries did move away from the wealth taxes, but not quite to the extent stated in the op-ed. We rate this claim Mostly True.

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Mostly True
"Of the 14 wealthy OECD countries with a wealth tax in 1996, 10 have since then abandoned it."
In a Fox News op-ed
Sunday, April 28, 2019

Our Sources

Fox News, Elizabeth Warren's 'wealth tax' has three strikes against it -- Here's why. April 28, 2019

Organization for Economic Cooperation and Development, Revenue statistics, accessed May 7, 2019

Tax Foundation, What the U.S. Can Learn from the Adoption (and Repeal) of Wealth Taxes in the OECD, Jan. 30, 2019

Organization for Economic Cooperation and Development, The Role and Design of Net Wealth Taxes in the OECD, April 12, 2018

Ifo Institute for Economic Research, Wealth and Inheritance Taxation: An Overview and Country Comparison, June 2018

European Commission, Anna Iara, Wealth distribution and taxation in EU members, Taxation Papers 2015

Ernst and Young,  Worldwide Estate and Inheritance Tax Guide 2018, 2018

Ernst and Young, Worldwide corporate tax guide 2018, 2018

PWC, Worldwide Tax Summaries Online, accessed May 7, 2019

Blevins Franks, How much capital gains tax will you pay when selling a property in France?, March 28, 2019

Irish Revenue Department, Capital Gains Tax (CGT) on the sale, gift or exchange of an asset, accessed May 7, 2019

Deloitte, International tax: Italy highlights, Luxembourg, the Netherlands, 2018

Government of the United Kingdom, Capital Gains Tax, accessed May 7, 2019

KPMG, Belgium – New Tax on Resident and Nonresident Individuals’ Securities Accounts, Feb. 8, 2018

European Commission, Anna Iara, Wealth distribution and taxation in EU members, Taxation Papers 2015

Wojciech Kopczuk, Taxation of intergenerational transfers and wealth, NBER, November 2012

Email interview, Joel Griffith, research associate, Heritage Foundation, May 8, 2019

Email interview, Daniel Bunn, director of global projects, Tax Foundation, May 8, 2019

Email interview, Wojciech Kopczuk, professor of economics and international and public affairs, Columbia University, May 5, 2019

Email interview, Reuvin Avi-Yonah, professor of law and director of International Law Program, University of Michigan School of Law, May 6, 2019

Interview, Chris Hayden, spokesman, Warren for President, May 7, 2019

Photo: Back of the Breakers, Andy Gregorowicz, via Flickr Creative Commons


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