Today an article ran in the Guardian Comment is Free section, railing against the proposed wealth tax. The central argument? That wealth taxes are inefficient at raising revenue.
Why? Because they provoke capital flight.
Here’s a little quote:
Sweden used to have a form of wealth tax, but they abolished it in 2011. It raised only SKr4.5bn (£427m) from 2.5% of taxpayers, but was estimated to have driven SKr1,500bn (£142bn) out of the country. Fear of capital flight led the Italian PM Mario Monti to abandon plans for his wealth tax, despite the crisis that threatens his country. Both the Irish and Dutch governments cited capital flight as the principle reason for abolishing their wealth taxes as well.
Here is direct proof of two things:
1) That the country which acts alone, loses out competitively in the global marketplace.
2) That just the fear of this competitive disadvantage is sufficient to constrain policy making amongst national governments.
Only when all nations agree to act simultaneously together can this problem be overcome. Only together can we, the people, drive our governments to do so.