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  4. Preliminary Program
  5. Perspectives on Wealth Taxation
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Perspectives on Wealth Taxation

Paper Session

Monday, Jan. 4, 2021 12:15 PM - 2:15 PM (EST)

Hosted By: American Economic Association
  • Chair: Emmanuel Saez, University of California-Berkeley

Wealth Taxation and Redistribution for the 21st Century

Thomas Piketty
,
Paris School of Economics

Abstract

Drawing on the history of inequality across human societies laid out in Capital and Ideology, the paper spells the key role that a progressive wealth tax could play in regulating wealth inequality in the 21st century. Annual progressive wealth taxation can be used as a tool to fund a universal capital endowment and to make concentrated property less permanent within a market economy. In effect, progressive wealth taxation and redistribution acts as a permanent land reform. Together with comanagement and power sharing in corporations, wealth taxation can contribute to define a new model of participatory socialism and supersede capitalism as we know it.

Wealth Taxation in Developing Countries: Do They and Can They Work?

Juliana Londono-Velez
,
Univesity of California-Los Angeles

Abstract

This paper describes the wealth tax experiences in developing countries. Progressive wealth taxes could help developing countries address their extreme inequality and raise tax revenue. However, these countries face specific hurdles in terms of administration and enforcement, including high informality, limited administrative resources, weak enforcement capacity, political capture, and a particular vulnerability to tax havens. Drawing from the specific experience of Colombia, this paper identifies a set of requirements that would be needed to make wealth taxes work in developing countries.

Tax Withholding on Capital Gains as Pragmatic Wealth Taxation for the United States

Danny Yagan
,
University of California-Berkeley
Gabriel Zucman
,
University of California-Berkeley
Emmanuel Saez
,
University of California-Berkeley

Abstract

The United States never had a federal wealth tax but has a long experience taxing capital gains, which capture wealth gains over and above savings. Currently, US capital gains taxation suffers from three main drawbacks: (1) the tax can be deferred until realization, (2) it can be avoided entirely if gains are not realized before death, (3) capital gains are taxed at much lower preferential rates. A simple way to resolve all these drawbacks is to impose a recurrent annual withholding tax on the stock of unrealized capital gains above an exemption. This withholding tax is credited back upon realization. This tax would align the taxation of capital gains with the taxation of ordinary income were taxes are withheld as source. It would avoid the enormous cyclicality of mark-to-market capital gains taxation. Among billionaires, unrealized gains constitute the vast majority of wealth and therefore, the withholding tax would restore tax progressivity at the very top, as a wealth tax would. Such a tax would also be valuable for state income tax as taxes on capital gains can be easily avoided by moving temporarily to a zero income tax state before realizing gains. We present revenue and distributional statistics for such a tax and compare it to other proposals such as mark-to-market taxation and direct wealth taxes.

Wealth Taxation in Europe: Lessons and Perspectives

Emmanuel Saez
,
University of California-Berkeley
Gabriel Zucman
,
University of California-Berkeley

Abstract

This paper describes the wealth tax experiences in Europe. Combining top wealth share estimates along with wealth tax revenue and nominal wealth tax rates, it shows that the wealth tax base was quite narrow in many European countries due to large exemptions as well as tax avoidance and evasion. The paper explains why such exemptions were granted and how they undermined the European wealth taxes leading in many cases to their repeal. Drawing from these lessons, the paper lays out the key features on design and enforcement that are required for wealth taxes to be successful in the European context.
Discussant(s)
Joel Slemord
,
University of Michigan
JEL Classifications
  • H2 - Taxation, Subsidies, and Revenue
  • H3 - Fiscal Policies and Behavior of Economic Agents