IFF-HSG Working Papers – No. 2021-8

Based on an online workshop organized by the Universities of Düsseldorf and St. Gallen in September 2020, the following report presents comparative and interdisciplinary perspectives on the existence and future of wealth taxation. Due to additional tax revenue needs triggered by the pandemic, political initiatives point to unequal wealth distributions and want to achieve redistribution through wealth taxation. Economic considerations show that the inequalities are not easy to determine. In terms of design, approaches to a broad, pragmatically determinable tax base are at odds with sometimes high assessment requirements that are difficult to enforce efficiently. As far as the level of the tax burden is concerned, all applicable wealth taxes are limited to moderate rates so that the tax burden can be paid through revenue realized on the taxable wealth. Thus, while a wealth tax may have proved unwise from a tax policy perspective, it remains unclear whether it would not be permissible to a certain extent despite the protection of property.

Wealth taxes limited to the deemed income, income taxes as well as inheritance taxes are complementary and the transitions are fluid. Wealth taxes can functionally replace capital gains taxation and inheritance taxes. Conversely, this applies to the proportional taxation of hidden reserves. The complementary relationship has led to coordination rules in the sense of overall limitations in several countries. In federal systems, these relationships raise controversial questions of competence.