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More tax on asset gains is likelier than a wealth tax

Thursday, May 13, 2021

Significance

Developed economies have implemented fiscal support measures worth over 16% of their GDP to combat the pandemic's impacts. To pay off the resulting debt and to ensure sufficient revenue in the face of a fragile and uneven recovery, new taxes and higher rates are being considered.

Impacts

  • Levying a wealth tax on productive firms risks starving them of capital for the future.
  • If levied too high or too long, people would sell assets to pay, depressing asset prices, reducing investment and prompting outflows.
  • Criticisms of wealth taxes mean that a one-off surcharge on investment income above a certain threshold would be easier and more popular.

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