More tax on asset gains is likelier than a wealth tax

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.