Recently, great interest has been paid to ideas of a British wealth tax. Britain’s struggling finances have caused eyewatering tax rises and seen the rise of the Green Party whose policy is to tax wealth.
A wealth tax is a direct tax on the value of an individual’s total net assets at a certain point in time. These assets include vehicles, jewelry, artwork/antiques, savings/investments, cash, property, intellectual property, and businesses. Such a tax would be catastrophic, as I will show.
Less Revenue Generated Than Predicted
Proponents argue that a wealth tax would deliver £10–25 billion to the government.
The promise of these revenues is based on flawed international comparisons. Current wealth taxes (of which there are only four in the world—which says much about their credibility) have “low rates, wide exemptions and [are] applied broadly” while “UK proposals are the opposite.” Therefore, more drastic UK measures make it less likely to recover the promised revenues due to the effect of “capital flight,” which is the outflow of wealthy individuals and their assets. This makes a comparison with the UK unfair.
Existing wealth taxes produce limited revenue. For example, the Spanish central government’s Solidarity Tax aimed to “collect over EUR 1.5 billion in 2023,” but only managed 40% of this (EUR 0.6 billion).
Wealth taxes are over-reliant upon the few, making the tax superficially attractive to money-hungry legislators, but the tax revenue is unstable. A pseudo-wealth tax was proposed in the State of Washington of 1% on assets over $250 million, but once this was announced/expected, Jeff Bezos moved himself and many of his assets to Florida, costing Washington State nearly 45% ($1.44 billion) of the predicted $3.2 billion/year revenue. The people with the highest assets are also highly mobile; threatened with a wealth tax, many will just leave.
Applying the tax itself also has high administrative costs. Valuing assets such as artwork, private businesses, and intellectual property presents challenges. The UK’s Wealth Tax Commission (2020) alone estimated the up-front cost of creating this new administrative apparatus to be £600 million, which is 10% of HMRC’s “current cost of running.” Some argue for applying “the same rules and procedures for valuing assets” used in calculating capital gains and inheritance taxes. Yet valuation principles and their application vary widely with significant elements of valuer-discretion, enabling multiple legal challenges. Even former Labour Chancellor Denis Healey concluded that wealth taxes do not “yield enough revenue to be worth the administrative cost and political hassle.”
Wealth Taxes Increase Poverty
The main argument for wealth taxes is to “redress the glaring inequality in the distribution of wealth in Britain today.” Yet the opposite would happen with the economic situation of all British citizens worsening because “wealth taxes disincentivise entrepreneurship, leading to less innovation and suppress long-term growth,” reduce wages, “destroy jobs,” and reduce the stock of capital. As a result, all “income groups are worse off under a wealth tax due to decreased economic activity.” Margaret Thatcher herself highlighted this damning effect in November 1990 in response to an MP at PMQs: “He would rather that the poor were poorer, provided that the rich were less rich.”
One contemporary wealth tax proposal was suggested by French economist Thomas Piketty in his book Capital in the Twenty First Century, where he proposed various wealth taxes between 0.5–2% on differing levels of wealth. This proposal was reviewed by the Tax Foundation (a British think tank) who found that “the effect of a potential version of Piketty’s wealth tax on the US economy… would be devastating… Over a 10-year period, wages would be 5.2% lower, 1.12 million jobs would be lost, and the capital stock would be 16.5% lower,” which would cause “a loss of USD 1 trillion,” with the wealth tax revenue generating “only USD 63 million.” Thus, “all social classes, including the poorest, would be affected by the wealth tax due to the reduction in economic activity.” In short, a wealth tax would damage every British citizen’s finances while failing to reduce inequality.
Legal Challenges
Legal challenges would become endless as wealthy taxpayers dispute valuations. This has already happened in several European countries (e.g., Spain, Germany, and the Netherlands). The Dutch wealth tax was declared unconstitutional by their Supreme Court in 2021 and 2024 for the same reasons: it is “discriminatory,” and it breaches European Law on property rights.
Legal challenges create significant costs, making net wealth tax revenue less, whilst generating strong debate about whether wealth taxes actually create the fairer society wealth taxes purport to achieve.
Wealth Taxes Are Anti-Growth
A wealth taxes is anti-growth (the very thing the incumbent UK government wishes to avoid) because it “makes savings and investments less attractive for UK investors and business-owners,” with many likely to opt for “capital flight” or increased expenditure. The latter is bad because consumption has only short-term economic benefits while saving and investing have long-term benefits: increasing capital for investment through putting money in banks which is lent to businesses to finance new projects.
Many argue that “capital flight” is unlikely, some quoting a report published in 2025 by Tax Justice Network which found that the 9,500 millionaires reported to have left the country “represented 0.3% of the UK’s 3.06 million [millionaires].” Here are two examples of “capital flight.” Firstly, the Wealth Tax Commission found that many ultra-wealthy individuals were “likely to leave or move their assets” abroad. Secondly, “after a 1% increase in Norway’s wealth tax, many high-net-worth individuals left the country.”
Misconceptions About Public Support
Public support for wealth taxes is a misconception.
Firstly, people support wealth taxes because they believe that wealthy people do not pay their fair share of taxes. This is unfair, given that around “60% of income tax revenue comes from 10% of earners, and 30% from the top 1%.”
Second, the public are often provided with no context or information about the trade-offs (e.g., cost of implementation) of a wealth tax. Research shows that the public support any tax measure if there are no downsides, but once the downsides are presented, the support for a tax declines, in some cases substantially.
Conclusion
A wealth tax would devastate the UK economy. It is deeply worrying that the Green Party advocates so strongly for such a tax. This makes the Green Party a threat to the well-being of our economy, and I urge all not to fall for their alluring trap.
What is the alternative? The answer is reforming capital gains, income, or inheritance tax. By reform we not only generate more revenue but create a fairer tax system and a fairer society.
I end with this phrase by Iain MacLeod (former Conservative Chancellor of the Exchequer and Leader of the House of Commons): “The socialists can scheme their schemes, and the liberals can dream their dreams, but we, at least, have work to do.”
The post Wealth Tax: A Simplistic Answer to Complex Problems was first published by the Foundation for Economic Education, and is republished here with permission. Please support their efforts.
