Why a Wealth Tax won’t work

Richard Burgon, MP for Leeds East, delivers an 8,000-strong petition to Downing Street in July, calling for a wealth tax on assets over £10million

Many on the left are increasingly advocating for a wealth tax on the so-called “super rich” (definitions of which vary depending on how hard-left the proponent of such taxes might be), in order to tackle what they perceive to be inequality within the British tax system, and to fund public spending. Prominent Labour MPs and senior figures from within the party, including former leader Neil Kinnock, and moronic MP for Leeds East Richard Burgon, are amongst the most vocal advocates of such a measure, supported by other prominent figures such as RMT Union Secretary-General Mick Lynch, and newly elected Green Party Leader Zack Polanski.

The claims that are made regarding the amount of revenue that a wealth tax could potentially generate are often eye-catching, and it is no surprise that those on the left who favour a tax system that places an ever-increasing burden on high earners to prop up our failing economy as a more palatable alternative to, for example, making cuts to our bloated welfare bill, are joining the calls for the implementation of such taxes at the next budget in November.

Indeed, the aforementioned nauseating windbag from Leeds East, Richard Burgon, seems to speak about little else. In July, he delivered a petition to Downing Street, supposedly signed by 8,000 people, calling for the implementation of a wealth tax on assets over £10million. And just this week, he has posted on his X account for approximately the 7,000^th time:

“A 2% wealth tax on assets over £10 million could raise £24 BILLION per year.”

As eye-catching as such claims are, a significant emphasis really needs to be placed on the word “could” in that post. What Burgon’s simple mind fails to appreciate is the nuance that such measures contain. The plain reality is this:

WEALTH TAXES DON’T WORK.

At least 12 OECD countries, primarily in Europe, have reversed their wealth tax policies by fully repealing net wealth taxes since 1990. This represents a significant decline from the 15 OECD nations that imposed such taxes at the time (all European), down to just three today (Norway, Spain, and Switzerland). These reversals have been driven by a combination of economic, administrative, and behavioral challenges that undermine the effectiveness of wealth taxes.

Countries that have tried wealth taxes, and subsequently reversed them because they failed to deliver the revenue anticipated, include Austria, Denmark, Germany, France, Sweden, Belgium, Greece, Italy and The Netherlands.

Those who support wealth taxes consider them a vehicle to promote fairness, reduce inequality, and generate revenue from the ultra-wealthy. However, empirical evidence from OECD reports, academic studies, and government reviews shows that wherever they have been implemented they have consistently underperformed expectations.

When implemented, wealth taxes have rarely exceeded 0.1-0.5% of GDP in revenue, often offset by lost indirect taxes (e.g., VAT, and income from investments). In Sweden, the tax yielded just 0.16% of GDP before repeal, with no fiscal gap upon abolition. France's ISF raised €5 billion annually (0.2% of GDP) but cost €125 billion in capital flight since 1998. A 2004 Institut de l'Entreprise study across Europe found "relatively low returns" despite high management costs, making them inefficient. The OECD's 2018 report on net wealth taxes echoed this, noting yields were "negligible" after behavioural adjustments.

Part of the problem with wealth taxes, in addition to almost universally lower than expected revenue generation, is that they often come with prohibitively high administrative and compliance burdens. At a time when tax avoidance already costs the UK treasury approximately £7billion per year, and the number of HMRC staff currently employed (at taxpayer expense) is at a record high 66,000, adding further complexity into an already convoluted tax system brings with it significant additional cost and risk, for potentially questionable benefit.

Valuing illiquid or diverse assets (e.g., art, businesses, jewellery) is subjective and requires annual appraisals, opening the door to “creative accounting” and leading to disputes and evasion. In Austria, "high administrative costs" were explicitly cited for 1994 repeal of wealth taxes. Germany's 1997 abolition followed similar complaints about enforcement complexity. The Tax Foundation estimates compliance costs could exceed revenue in many cases, as taxpayers must report global net worth (assets minus debts), often involving third-party valuations.

However, perhaps the biggest reason why wealth taxes often cost more to administer than they generate in additional revenue is capital flight. Mobile high-net-worth individuals have typically sought to relocate to low-tax jurisdictions when wealth taxes have been imposed upon them, eroding the tax base. At a time when the British taxpayer is already suffering under the weight of the highest tax burden since the end of the Second World War, and given that the wealthiest 1% of individuals contribute in excess of 30% of income tax, this country can ill-afford yet more policies that act to drive away our best and brightest.

According to a report from The Telegraph, the number of millionaires fleeing the UK has increased by 157% under this Labour government following the short-sighted abolition of the Non-Dom tax status from UK tax legislation, with one millionaire leaving the UK every 45 minutes since Keir Starmer came to power.

This is not simple scaremongering. Capital flight is a very real and proven consequence of wealth tax imposition. During the period in which wealth taxes were in place, France saw 42,000 millionaires leave (2000-2012), including high-profile cases like Bernard Arnault. Sweden's tax drove IKEA founder Ingvar Kamprad abroad in the 1970s (he returned post-2007 repeal). Norway's 2022 tax hike prompted 30 multimillionaires to emigrate—more than in the prior 15 years. Studies (e.g., Brülhart et al., 2019) confirm regional migration effects, with a 1% rate increase reducing reported wealth by up to 43% via outflows. This "brain drain" also deterred foreign investment, harming growth.

Ultimately, taxes on capital discourage saving, investment, and entrepreneurship. OECD analyses link wealth taxes to 2-5% long-term GDP declines and job losses, as they penalise asset accumulation over consumption. While wealth taxes appeal to some, their practical failures—evidenced by consistent repeals—stem from these interconnected issues. Countries like Norway and Switzerland retain them at low rates (0.1-1.1%) with high thresholds, but even there, debates continue over hikes causing outflows.

So, whilst small-minded simpletons like Richard Burgon and Zack Polanski preach about unsubstantiated theoretical revenues that a wealth tax in the UK “could” generate, they simply fail to appreciate the bigger picture and long-term economic damage that would almost certainly result from such a policy.

I am all in favour of a progressive tax system that maximises receipts for the treasury, in which the broadest shoulders (to some extent) carry the heaviest load, but only provided that it does not punish success or discourage aspiration. But this would be much more effectively achieved by increasing the proportion of the population that actually pays tax, by implementing a tax strategy that rewards investment in the workforce through incentivisation, rather than seeking to hammer those who have worked hard and been successful with yet more taxes. It is unfair, it is unpalatable for those caught within the scope of these taxes, and it will inevitably drive away our most exceptional entrepreneurs and biggest job creators.

We cannot tax our way to growth, no matter how much proponents of wealth taxes want to persuade you that this is possible. Supporting business to create employment, and getting more money in people’s pockets to encourage economic activity, is the only way forward.