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In an article for the Vox website, Stefan Bach and Gert Wagner believe that European governments should levy a one-off wealth tax to save the Eurozone:

  • "The idea behind this is straightforward enough. 
  • "Increased levels of public debt are accompanied by mounting private wealth, which is increasingly concentrated on the wealthy elite."In Germany, for example, two thirds of the national wealth belongs to the richest 10% of the adult population.
  • "According to our analysis, a one-time capital levy of 10% on personal net wealth exceeding 250,000 euros per taxpayer (€500,000 for couples) could raise revenue of just over 9% of GDP.
  • "The wealthiest 8% of the adult population would be liable to the levy. Even with higher allowances of, for instance, €500,000 and €1 million, the levy could raise revenue of about 6.8% and 5.6% of GDP respectively. The number of taxpayers would sink to 2.3% and 0.6% of the adult population.
  • "In the other Eurozone crisis countries, it would presumably be possible to generate considerable amounts of money in the same way."

Well, no doubt, we’d all love to sell our houses in order to save the single currency, but, small-minded, short-sighted, Little Englanders that we are, we’ve somehow failed to join the club and thus won’t have the privilege of paying the thrillingly higher-than-expected membership fees.

Still, it’s not as if we haven’t got some debts of our own to pay off – so might a wealth tax of our own have a role to play?

  • "The main benefits of such one-off levies are that they induce no immediate adjustment of economic behaviour. There is only little risk of tax avoidance as long as the fiscal authorities are able to capture taxable assets. Insofar there are no 'excess burdens' in economic terms, unlike with an increase in conventional recurrent taxes, in particular those on higher income and wealth… such as the 50p income tax surcharge in the UK as of 2010 [and] the hike in top income tax rates and wealth taxation recently announced by French president Hollande…"  

The trouble with this argument is that there’s no reason to think that a ‘one-off’ levy would only happen once. In the German context, Bach and Wagner’s most confiscatory proposal would only raise a sum equivalent to 9% of GDP – a fraction of the public debt levels in most countries. If governments can get away with a ‘one-off’ levy, they’ve certainly got an incentive to see if they can get away with it again.

That said, the main alternative – the "financial repression… of creeping inflation and low interest rates, which seems to have become the favourable remedy in the UK or the US" – isn’t very fair either. What’s more it tends to hurt people of more modest means than those likely to be targeted by wealth taxation.

There is, however, a third way. Governments can stop propping up the banks – or, rather, they can start extracting a much higher price for doing so. Bad debts would be systematically purged from the banking system through a programme of managed default. (No privately-owned institution would be forced to take part, instead they would be free to take their chances in the market place.) Ordinary people who expected no more than a safe place for their savings would be protected, but those who got rich on such dodgy investments would lose their stake.

Of course, the elimination of so much bad debt would mean that an awful lot of ‘wealth’ would be wiped out, but only by means of a process that is, by definition, one-off and which would provide a fresh start for the whole economy.

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