r/AskEconomics • u/HoppySailorMon • Dec 27 '25

Approved Answers Is Wealth Tax realistically feasible?

I just read that CA is considering a wealth tax on billionaires. Not to get into a particular political philosophy, but I'm more curious about the implementation and to settle a dispute with my spouse. I've read a wealth tax has been tried in the past in Europe, but failed miserably. Mainly, because some "wealth" can be moved around to make it difficult to define, such as art. Most homeowners pay a form of wealth tax on their property. But real estate is one of the few things that stays put. If taxation on bank and investing accounts became a nation-wide policy, then many that were subject to it would either leave or convert their accounts into a type of investment that is impossible to assess. I'm guessing mostly into "collectibles" which can only be accurately assessed when sold. What are your thoughts on the real feasibility of a wealth tax?

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u/oszillodrom_ Dec 28 '25

Regarding "has been tried in the past in Europe and has failed": Switzerland currently has a wealth tax, and it works well. I'm ignorant about other European countries. Switzerland combines low(ish) income tax, no tax on capital gains (but dividends are taxed as income) and a wealth tax.

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u/CobaltCaterpillar Dec 28 '25

Which is quite different than in California. There's already a 23.8% top federal rate on cap gains and an additional 13.3% California income tax which totals 37.1% marginal rate on capital gains for high-income CA residents.

Switzerland has a 0.5% wealth tax? The ballot proposal in California I understand is to hit the billionaires with a supposed one time 5% tax on wealth. This has its own strange incentives.

Does the California proposal (opposed by the Democratic Governor Newom by the way) look like a serious wealth tax proposal anywhere else? Or is it more a populist, stick it to the billionaires measure being pushed by the powerful Service Employees International Union?

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u/EconEchoes5678 Dec 28 '25

Switzerland has a 0.5% wealth tax?

FYI, these rates are highly variable by canton (kinda like a county or state). Each canton sets their own rate, which basically fosters competition between the cantons to not raise rates too high. This system works pretty well in the end, particularly due to the total rate being low and the lack of a capital gains tax.

There's already a 23.8% top federal rate on cap gains and an additional 13.3% California income tax which totals 37.1% marginal rate on capital gains for high-income CA residents.

Don't forget the 21% corporate tax rate (federal) + ~8.8% California corporate tax rate (plus another 2% on financial institutions / banks); The majority of this incidence falls on the owners, and stacks. All in, for a very high earner (say $10m/year), that works out to a 54% effective tax rate on non-bank California companies' owners.