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:
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 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.