Tax rates between 1% and 3% on the assets of the richest Europeans could raise more than 10% of Europe's gross domestic product in revenue over the next 10 years, the paper said. The windfall, the paper said, would be enough to pay for unprecedented government spending, which is anticipated as nations deal with the health crisis caused by the COVID-19 pandemic and try to keep their economies afloat amid a lockdown on most public spaces.
Gabriel Zucman and Emmanuel Saez of the University of California, Berkeley, and Camille Landais at the London School of Economics authored the paper, which was published by VoxEU.org, a website managed by a group of economists. Zucman and Saez recently called for a wealth tax in the U.S. in their book "The Triumph of Injustice" and advised many recent Democratic presidential candidates who proposed similar policies.
Their paper comes as governments scramble to deal with the devastating coronavirus fallout and have barely given thought to covering expenses. A group of finance ministers from EU nations will meet on April 7 to discuss issuing "Eurobonds," or debt issued jointly to relieve individual countries from shouldering the burden themselves. The officials hope to avoid a repeat of the fallout from the 2007-09 financial crisis, which led to acrimony among nations in the European Union as well as tax hikes that crippled the recovery.
Zucman, Saez and Landais said jointly held debt was the right approach but that to pay it down, the EU should also enact a continent-wide tax on the wealthiest, who will benefit from the increased government borrowing as they put more of their income into savings.
"These savings finance the new public debt that helps those who lose their incomes during the crisis," the authors wrote. "As a large increase in public debt means a large creation of private wealth, it seems natural to ask private wealth to contribute to repaying the public debt after the crisis."
And there is a precedent, they note. West Germany enacted temporary wealth taxes as high as 50% as part of the Lastenausgleich program to compensate Germans who lost land or property during World War II. The authors said that policy "paved the way" for Germany's post-war economic success, compared with the inflation that beset France and the United Kingdom.
"A wealth tax is preferable to inflation because it would provide clarity on the allocation of costs while inflation redistributes wealth in an opaque and chaotic manner," they wrote.
Wealth taxes have emerged as a hot topic in economic policy circles as well as politics, as candidates continue to focus on economic inequality. But the issue has a fraught history in Europe. Many EU countries enacted wealth taxes in recent decades, but almost all have been repealed or pared back as tax authorities dealt with evasion and other difficulties in administration. Critics of the idea point to the European failures, while supporters say that new information-sharing and global tax enforcement efforts, as well as better-designed policies, could avoid that fate the second time around.
In their most recent paper, Zucman, Saez and Landais argue that the past experience with evasion — including taxpayers who renounced their citizenship or physically moved to avoid falling under various national wealth taxes — is why the EU should enact it as a union-wide policy. It would also match the EU's mission, they claim.
"A tax at the European level would be a concrete embodiment of European solidarity in the fight against the COVID epidemic," they wrote. "This would overcome oppositions based on selfish national self-interest, and contribute to creating a sense that Europe can indeed work for everyone."
The authors did not respond to a request for comment.
--Editing by Vincent Sherry.
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