Rising income inequality and the public display of billionaire power are fueling calls for new taxes on the world's wealthiest individuals. Can wealth ever be taxed fairly?
Few people enjoy paying taxes. But many voters see no problem with taxing the super-rich and having them pay their "fair share." One approach is to raise income taxes. There is also the possibility of an annual or one-time tax on everything someone owns above a certain threshold.
Some governments want to tax extreme wealth to lower taxes for the middle class or ease social inequality. Others want to fill budget gaps. Still others argue philosophically that excessive wealth should be limited because it no longer contributes to the well-being of these individuals.
Ultra-high-net-worth individuals are considered those with a net worth of at least $30 million (€25.9 million), while super-rich individuals have $300 million or more.
In the United States, Mitt Romney, former governor of Massachusetts, senator, and US presidential candidate, sees a major problem in tax loopholes related to capital gains. "We have reached a point where any combination of solutions to our country's economic problems will involve the wealthiest Americans contributing more," he wrote in a December 2025 New York Times article titled "Tax the Rich, Like Me."
Zohran Mamdani, the new mayor of New York City, has proposed raising the city's income tax rate from 3.9 percent to 5.9 percent for incomes over $1 million per year. In early March, lawmakers in Washington state approved a new personal income tax on incomes over $1 million. The measure awaits the governor's signature. Others are considering similar measures.
These proposals are significant because the United States is the world's largest economy. It is also home to the largest number of millionaires and billionaires, according to Forbes magazine.
"Taxing the super-rich is a fair, economically efficient decision. In some countries, it helps other important goals, such as strengthening democracy," said Brian Gell, a law professor at the University of California, Berkeley.
In many countries, the super-rich control so many societal resources that they can influence political and economic outcomes, Gell says, which can lead to unstable policies and catastrophic economic consequences.
A major obstacle to taxing the super-rich is part of existing tax systems, as most impose taxes only when investment assets are sold, Gell says. "Super-rich families can afford to sell only a small portion of their wealth, which allows them to choose when and often where to pay taxes," he added.
Who fears a wealth tax?
What if, instead of a corporate tax, you gathered all your assets and then taxed that amount—in other words, if a wealth tax were introduced? Since 1965, 13 countries in the Organisation for Economic Co-operation and Development (OECD) have introduced a net wealth tax. Today, only four countries still have wealth taxes, including Norway, Spain, and Switzerland.
In general, these taxes have raised little revenue and caused administrative problems, say Enache and Mengden. Another issue has been legal disputes.
In 1995, the German Federal Constitutional Court ruled that the wealth tax violated the principle of equality and declared it unconstitutional. As a result, Germany abolished the tax in 1997. The Dutch Supreme Court ruled in 2021 that the country's wealth tax violated European law on property rights and the prohibition of discrimination.
Wealth taxes are difficult to calculate
When it comes to wealth taxes, the big problem is determining someone's total wealth. Cash is easy to count, but what about all those houses, cars, private jets, and investments? Not to mention art collections or the contents of bank vaults. This becomes even more difficult and costly if it has to be done every year.
Wealth taxes discourage saving and investment, which harms entrepreneurship in the long run, according to a study by the Tax Foundation. Additionally, wealth taxes "can lead to capital flight and the relocation of wealthy individuals to neighboring countries," said Mengden and Enache. "After Norway increased its wealth tax by 0.1 percent, high-net-worth individuals left the country for places like Switzerland and the United Kingdom."
Brian Gell does not believe that the ultra-rich can simply move their wealth rather than allow it to be taxed. "For example, good legal design can make it much harder for wealthy investors to avoid taxes," Gell said.
When it comes to a new wealth tax, California could take a leading role with a single 5 percent tax on people with wealth exceeding $1 billion.
If the measure passes a vote in November, it will be a major test for a leading economy. In 2024, strong growth made the state the world's fourth-largest economy, after the United States as a whole, China, and Germany.
Supporters say the tax will increase government revenue. Critics say it will drive the wealthy to Texas, Florida, or Nevada.
Governor Gavin Newsom opposes the idea, as do technology leaders and likely many of the state's 200 billionaires. Their biggest concern is that the tax considers illiquid wealth and unrealized gains.
This means that "theoretical paper profits" on stocks or real estate would be taxed. Critics fear this could force some people to sell their homes and make other transactions. Governments have many tools when it comes to taxation, but they must be used wisely if the goal is for taxes to be fair. /DW/