[Washington Examiner] Who is going to pay for all this? Governments across the West are up to their eyeballs in debt, and the economic crisis shows no sign of easing. Even when vaccination is widespread, the fiscal consequences of the lockdowns will last. Fewer people are working, and more people are claiming benefits, which means that governments are receiving less revenue while making more payments.Where will the money come from? Left-wing politicians around the world are coalescing behind a single solution: a wealth tax. There is plenty of dough, they say, but it is stashed away in mansions and gold bars and racehorses and Picassos. A tax on assets, a one-off, to balance the books, would solve the problem without hurting ordinary people.
Lots of these politicians were, of course, calling for wealth taxes long before the lockdowns. Sen. Bernie Sanders liked to claim that seizing a proportion of the assets of the rich would "raise an estimated $4.35 trillion." Sen. Elizabeth Warren used to tell us that a 2% wealth tax would pay for universal child care, better schools, and free college tuition. Like everyone else, they have seized on the coronavirus as a vindication of whatever it was they happened to be banging on about before.
Still, the epidemic has given them a new impetus. Common threats, as this column keeps gloomily pointing out, make voters more collectivist, more authoritarian, more demanding of state intervention. Socialists around the world, including Thomas Piketty, are very excited about a report by a group of British academics, grandly titled the Wealth Tax Commission, which suggests that a 1% levy on assets above 500,000 pounds, or $665,000, would generate $346 billion. Argentina has become the first country to put the idea into practice, expropriating 3.5% of any assets above 200 million pesos, or $2.5 million.
Argentina’s Peronists, whose inability to learn from their mistakes verges on the heroic, say that the revenue will fund medical supplies, business relief, and social projects. In reality, though, there won’t be any revenue.
Since 1990, a dozen European countries have scrapped their wealth taxes on the grounds that the net impact was negative. The basic problem is that the rich don’t sit around waiting to be taxed. They find ways to shift their assets, or themselves, if necessary, to friendlier tax jurisdictions, leaving the rest of us to pick up their share of the tab. In the meantime, saving and investing are disincentivized, bad news at any time but calamitous when we are trying to recover from an epochal recession. As the Manhattan Institute puts it, "Of all the possible types of ways to collect revenue, wealth taxes are the least desirable."