Wealth tax

A wealth tax (also called a capital tax or equity tax) is a levy on the total value of personal assets, including bank deposits, real estate, assets in insurance and pension plans, ownership of unincorporated businesses, financial securities, and personal trusts. Typically, liabilities (primarily mortgages and other loans) are deducted from an individual's wealth, hence it is sometimes called a net wealth tax. Some jurisdictions require declaration of the taxpayer's balance sheet (assets and liabilities), and from that ask for a tax on net worth (assets minus liabilities), as a percentage of the net worth, or a percentage of the net worth exceeding a certain level. Wealth taxes can be limited to natural persons or they can be extended to also cover legal persons such as corporations. Iceland had a wealth tax until 2006 and a temporary wealth tax reintroduced in 2010 for four years. The tax was levied at a rate of 1.5% on net assets exceeding 75,000,000 kr for individuals and 100,000,000 kr for married couples. Some other European countries have discontinued this kind of tax in the recent years: Austria, Denmark (1995), Germany (1997), Finland (2006), Luxembourg (2006) and Sweden (2007). In the United Kingdom, property (real estate) is often a person's main asset, and has been taxed – for example, the window tax of 1696, the rates, to some extent the Council Tax, and a new mansion tax proposed by some political parties. In 2014, French economist Thomas Piketty published a widely-discussed book entitled Capital in the Twenty-First Century that posits the theory that economic inequality was worsening and proposes wealth taxes as a solution. The central thesis of the book is that inequality is not an accident, but rather a feature of capitalism, and can only be reversed through state interventionism. The book thus argues that unless capitalism is reformed, the very democratic order will be threatened. At the core of this thesis is the notion that when the rate of return on capital (r) is greater than the rate of economic growth (g) over the long term, the result is the concentration of wealth, and this unequal distribution of wealth causes social and economic instability. Piketty proposes a global system of progressive wealth taxes to help reduce inequality and avoid the vast majority of wealth coming under the control of a tiny minority. This analysis was hailed as a major and important work by some economists. However, Piketty's work is not without its critics. Other economists have challenged key aspects of Piketty's proposals and interpretations, stating that they are often inconsistent and/or flawed. In 1999, Donald Trump proposed for the United States a one off 14.25% wealth tax on the net worth of individuals and trusts worth $10 million or more. Trump claimed that this would generate $5.7 trillion in new taxes, which could be used to eliminate the national debt. However, as President in 2018, Trump signed a tax bill which substantially reduced taxes on capital by reducing corporate tax rates and that contributed to multi-billion dollar deficits.