A wealth tax is an inefficient tool for income redistribution, according to a study published on Friday 24 May by the business-oriented think-tank Tax Foundation Europe.
The study claims that the effect of such a tax would be to widen - rather than reduce - many of the socio-economic disparities it seeks to resolve, due in particular to the risks of capital flight, tax evasion and the complexity of applying the law.
In addition, the study finds that high marginal tax rates discourage investment and innovation, which are essential for economic growth and job creation. It also points out that differences in marginal tax rates have an impact on where high-income earners live and invest.
The study not only highlights the potential need to maintain decentralised tax policies in the EU, but also encourages each country to put in place the least distortive tax systems possible.
Although this is not the policy envisaged by political decision-makers, Tax Foundation Europe urges them to seek solutions to income inequality by simplifying the design of taxes.
“Well-designed tax systems that promote economic growth and social development allow for enhanced activity, which leads to more government revenue that can then be used for redistributive purposes”, emphasised Diego Sánchez, guest author at Tax Foundation Europe, in a press release.
The European Citizens’ Initiative in favour of a European Wealth Tax (see EUROPE 13391/15) has so far received more than 190,000 supporters.
To read the study: https://aeur.eu/f/cdm (Original version in French by Anne Damiani)