Chair of the Council of Economic Advisers Christina Romer and Congressional Oversight Panel Chair Elizabeth Warren speak at the Women in Finance Symposium, March 29, 2010.
The Democratic Primary has already generated some outrageous proposals, and one of the worst is Sen. Elizabeth Warren’s wealth tax. The problem with wealth taxes is that they never work. The Europeans have tried them many times, and in most cases have already reversed course. My friend Chris Edwards explains the failure of Europe’s wealth taxes at Cato.org, writing:
More than a dozen European countries used to have wealth taxes, but nearly all of these countries repealed them, including Austria, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, the Netherlands, Luxembourg, and Sweden. Wealth taxes survive only in Norway, Spain, and Switzerland.
Before repeal, European wealth taxes — with a variety of rates and bases — tended to raise only about 0.2 percent of gross domestic product in revenue, based on Organization for Economic Cooperation and Development data. That is only 1/40th as much as the U.S. federal income tax raises.
Yet for little revenue, wealth taxes are difficult to administer and enforce. They may require taxpayers to report the values of financial securities, homes, furniture, artwork, jewelry, antiques, vehicles, boats, pension rights, family businesses, farm assets, land, intellectual property, and much else. But owners do not know the market values of many assets, and values change over time, so costly wealth-tax compliance would only make accountants wealthy.
And what about wealth held abroad? There is no way the Internal Revenue Service would be able to track down and value everything U.S. residents owned on a global basis.
In the 1970s, the British Labour government pushed for a national wealth tax and failed. The minister in charge, Denis Healey, said in his memoirs, “We had committed ourselves to a Wealth Tax; but in five years I found it impossible to draft one which would yield enough revenue to be worth the administrative cost and political hassle.”
Read more here.
Originally posted on Your Survival Guy.
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