Sustainability-oriented Future EU Funding: A European Net Wealth Tax

The increase of wealth inequality in many EU countries has spurred interest in wealthtaxation. While taxes on wealth for a long time have played only a marginal role in thepublic finance and taxation literature, in the more recent literature a variety of argumentsare brought forward in favour of (higher) wealth taxation. Most of these arguments directlyor indirectly refer to the potential of wealth taxes to contribute to various dimensions ofsustainability, in particular to economic, social, and/or institutional/culturalsustainability. Tax competition has led to an almost complete disappearance of recurrenttaxes on personal or corporate net wealth in Europe. EU-wide implementation of a netwealth tax based on harmonised tax provisions may serve as a first step in a longer-termoriented move of the stepwise expansion of net wealth taxes on a global scale. By dealingwith non- and under-reporting in the Household and Consumption Survey (HFCS) data setprovided by the European Central Bank, we are able to estimate the wealth distributionwithin 20 EU Member States. Applying a progressive household-based tax schedule with atax rate of 1% for net wealth above € 1 million and 1.5% for net wealth above € 5 million onthese adjusted wealth distributions yields potential tax revenues of € 156 billion, takinginto account the behavioural responses of individuals triggered by net wealth taxation.Given the positive sustainability properties of a net wealth tax with regard to economicefficiency and social inclusion, a European net wealth tax offers itself as an interestingcandidate for sustainability-oriented tax-based own resources to finance the EU budget.