Wealth Tax

👉🏽 This story is developed as part of the Doughnut Economics for Policymakers guide.

Progressive taxation on extreme wealth can mobilise substantial resources for public goods, reduce inequality, and strengthen both fiscal legitimacy and social cohesion. Governments can implement progressive income and wealth taxes on high-net-worth individuals, limit tax avoidance through measures like exit taxes, and increase financial transparency through international collaborations.

Overview

Wealth concentration has reached historic levels. Over 3,000 billionaires command fortunes comparable to annual incomes of entire countries, with the world's 12 richest having more wealth than the poorest half of humanity (more than 4 billion people). Yet, tax systems have become regressive at the top: billionaires globally pay an effective tax rate of only 0.3% of their wealth, while middle-income groups face stable or rising rates. A tax on the net worth (assets minus liabilities) of the ultra-rich is crucial to reduce inequality, strengthen fiscal legitimacy, and mobilise resources for essential investments in education, healthcare, and ecological regeneration. 

Three complementary approaches can address this:

1. Progressive income and wealth taxes: Governments can implement progressive taxes on high incomes, capital gains, inheritance, and accumulated wealth. Some historical and current examples include: 

• The USA: Top marginal income tax rates reached 77% in 1919, rose to 94% in 1944, and averaged 81% between 1932-1980. Estate tax rates remained between 70-80% from the 1930s-1980s. 
• The UK: Top rates on highest incomes consistently exceeded 90% in the 1950s and early 1960s, peaking at 99.25% during WWII and at 89% in the mid-1970s. Inheritance taxes ranged from 70-80% throughout the period 1940-1980.
• France and Germany: Top rates ranged between 50-70% from the late 1940s to 1980s. Germany's top rate was 90% in 1947-1949. France introduced a market-value-based wealth tax in the 1980s.
• Current examples: Argentina, Bolivia, Colombia, France, Norway, Spain, and Switzerland currently maintain wealth taxes for high-net-worth individuals, though often with exemptions and low rates (typically under 2%). Brazil, Germany, South Africa and Spain have supported a 2% wealth tax on billionaires with overwhelming public support. France debated a 2% tax on fortunes above €100 million in 2025. In the USA, Senator Elizabeth Warren and others advocate for the Ultra-Millionaire Tax Act, proposing a 2% tax on net wealth above $50 million and 3% above $1 billion.

2. Limiting tax avoidance through residency changes: Many countries such as Canada, Australia, South Africa, France, Germany, Norway and Spain impose exit taxes to prevent high-net-worth individuals from relocating to low-tax jurisdictions without paying their fair share. These often treat an individual’s assets as sold at exit, triggering capital gains tax. Countries like Spain also make those moving to tax havens liable for taxes for a set period following departure. Who is liable varies: for example, Germany targets individuals holding at least 1% of a company's shares, while France targets individuals who have been tax residents for at least six of the previous ten years with significant shareholdings. The USA taxes its citizens on worldwide income even when they become permanent residents elsewhere. China imposes strong capital controls, requiring governmental approval for asset removal.

3. International collaborations: Financial secrecy hinders governments from effectively taxing the ultra-rich, but recent research and campaign efforts have driven progress: the OECD's Common Reporting Standard requires automatic exchange of financial account information between countries, with nearly 100 countries now working together on over 85 million accounts worth $11 trillion. 81 countries have established beneficial ownership registers tracking who truly runs and profits from companies.

Implementation

Effective progressive taxation requires both national action and international cooperation. Nationally, governments need data tools, well-established tax systems, and well-trained tax authority staff to enforce laws that ensure everyone contributes their fair share.

Internationally, the UN Framework Convention on International Tax Cooperation provides a historic opportunity to redesign international tax architecture, creating the first globally inclusive forum for setting tax rules and fostering collaboration. Countries need not wait for universal agreement. Leadership by willing countries can demonstrate feasibility and benefits: for example, Brazil placed the billionaire tax on the G20 agenda during its 2024 presidency, while Spain, Brazil, and South Africa co-launched the Sevilla Platform for Action in 2025 to build support for taxing high-net-worth individuals.

Impacts

Progressive taxation mobilises substantial resources while addressing multiple crises. A 2-5% wealth tax on billionaires and centi-millionaires could generate $500 billion-$1.3 trillion annually. Well-designed and consistently-applied progressive tax-and-transfer systems have reduced income inequality by over 30% in Europe, North America, and Oceania. Evidence shows progressive taxation of very high incomes and large estates after WWII prevented wealth concentration from regaining pre-1914 levels, while decreased tax progressivity in the US and UK since 1980 largely explains increased inequality.

Challenges

• Cross-border coordination complexity: Differing national interests complicate negotiations. Wealthy economies and tax havens benefit from current systems and have attempted to block global progress.
• Political resistance: Ultra-rich individuals possess far greater resources for lobbying, finding loopholes, controlling media, and lodging legal challenges than many governments. Furthermore, billionaires are over 4,000 times more likely to hold political office than ordinary people.
• Implementation limitations: Tax systems alone have limited impact on inequality. They work best alongside well-designed transfer systems that use generated revenues to ensure strong social foundations for all (e.g. health and education).
• Administrative capacity: Effective wealth taxation requires accurate asset valuation, which has proved challenging in the past: for example, Germany and Sweden abolished annual capital taxes partly due to ineffective assessment methods. Many low-income countries face resource constraints and data challenges implementing tax laws. 

Reference and further reading

• A blueprint for a coordinated minimum effective taxation standard for ultra-high-net-worth individuals by Gabriel Zucman: this report presents evidence supporting the need for effective taxation of ultra-high-net-worth individuals, alongside an implementation proposal.
• The World Inequality Report 2026 provides latest data and research on the status of global inequality and its impacts on our societies. The report offers concrete policy recommendations. 
• Oxfam International’s 2026 report Resisting the Rule of the Rich exposes how rising inequality is eroding democracies and distorting political discourse and policy decisions. 
• The World Inequality Lab offers research insights and tools to educate the public about wealth tax such as the Global Wealth Tax Simulator ,South Africa Wealth Tax Simulator, and simulators for diverse tax plan possibilities for US. 
• Capital in the Twenty-First Century by Thomas Picketty provides a historical overview of income and wealth inequality, offering reflections on how government policies have influenced this and what is needed in the 21st century to counter it (paid access only).

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