To counter the rising problem of economic equality, a global wealth tax is a proposal that has been widely received and considered a viable solution. This tax however, aimed at diminishing the high rate of accumulated wealth by top decile earners, may not be as effective as it purports in theory for a number of reasons: there is limited evidence proving the desired effects will be achieved, all countries must agree upon a uniform system and share information, studies have shown that top earners may not be inclined to reduce savings and increase investment, and regulation may be difficult to implement. In the alternative, a more pragmatic policy of redistribution could be implemented by taxing high earners at high marginal …show more content…
James Wetzler, Thomas Piketty’s Wealth Tax Proposal Has Huge Problems, National Review, (March 27, 2014, 3:31 PM), http://www.nationalreview.com/agenda/374380/thomas-pikettys-wealth-tax-proposal-has-huge-problems-james-wetzler. Piketty’s approach runs counter to how income is taxed by most countries today, that is, going after the income produced by wealth such as dividends, rents, and capital gains, instead of the wealth itself. If the United States, for example, were to impose a national wealth tax, the IRS might have difficulty collecting from the wealthy because those who own a large quantity of assets would be incentivized to move or transfer title to their assets abroad. Piketty recognized this possible effect and therefore proposed the tax to be global, making assets taxable regardless of location. The effectiveness of this system depends on the assumption that all countries and tax havens in the world agree to tax equally and share information, an event that seems highly …show more content…
There is however, limited evidence from a few countries that have used such a system. Between 2002 and 2007, French Economist Eric Pichet examined the effects of France’s “solidarity” wealth tax and made a number of key observations. Eric Pichet, The Economic Consequences of the French Wealth Tax, 14 La Revue de Droit Fiscal 5 (2007), available at http://ssrn.com/abstract=1268381. France’s solidarity tax on wealth, created in 1981 and later reestablished in 1989, was intended to prompt redistribution, narrowing the gap between the rich and the poor. Id. at 3. Some of the conclusions made by Pichet in his study included: tax collection remaining at a low level (around 1.6% of proceeds); capital flight amounting to approximately €200 billion since the introduction of the wealth tax; the wealth tax likely being responsible for reducing GDP growth by 0.2% per annum, or around 3.5 billion (roughly the same as it yields); and the wealth tax causing France to become impoverished, shifting the tax burden from wealthy taxpayers leaving the country to the rest of the people. Id. at 2. Pichet’s analysis of the French wealth tax system supports the notion that the wealthy will be compelled to take their money out of the country and evade taxes, a conclusion drawn from statistics of rising property values and the distribution