Abubakr Buleshov | 13.10.2025
Wealth Tax: A Tool for Reducing Inequality or a Barrier to Growth?
Wealth Tax, a tax that only very rich people have to pay. (noun Oxford dictionary)
More specifically - a wealth tax is imposed on an individual's net worth: the total value of their assets (like property, investments, and savings etc) minus their debts.
It's set in order to reduce the wealth inequality and increase government revenue.
Thus, this essay will try to go over the incentives and disincentives it brings to a country. It will elaborate the positive and negative reasons to adopt this policy using examples like Spain and Norway, as they have such tax implemented.
There is a difference between other types of taxes. Income tax is on earnings of a person; property tax is on real estate; wealth tax is on the total net assets. Typical rates and thresholds of a wealth tax are ~0.1-3%. Assets which are usually taxed are real estate, shares, savings and luxury goods. Most of the time it's a progressive tax – higher the wealth, higher the rate.Impuesto sobre el Patrimonio - is the Spanish example of a wealth tax, which targets individuals with a net worth over €700,000, generating significant revenue for regional governments (areas like Madrid, Catalonia, or Andalusia etc.), and as the idea behind it helps limit extreme wealth concentration. This tax revenue is used to fund public services such as education, healthcare, transport, welfare programs in these areas.
In Norway, it is referred to as formuesskatt. The so-called ‘formuesskatt’ is applied above NOK(Norwegian Kroner) 1.7 million (~€145,000). Unlike the Spanish Impuesto sobre el Patrimonio, it is a mix of both municipal and national (0.7% goes to the municipality, 0.4% to the state), meaning that it is split, part of it is paid to the local government and the other national government of Norway. On the social basis it is widely accepted; contributes to Norway’s strong welfare model and low inequality.
The general analysis for both of the countries show that when combined with transparent administration, adequate rates and social trust, wealth tax can fund welfare without major economic harm.
Why should it be incorporated in other countries?
The main reason is that it reduces inequality; this ensures that even though income tax is progressive, taxation can continue to contribute to reducing inequality, promoting fairness especially in countries with high and growing wealth gaps. The raised revenue tax can fund parts of the economy such as; Healthcare, improving public health, boosts productivity and therefore increases economic growth, reduces long-term government spending as preventing diseases is cheaper than treating them; vaccinations, early diagnosis and overall hygiene of public facilities. Education creates more skilled workers, therefore, decreasing unemployment, increases innovation and in the process leads to building of industries, exports and jobs. Wealth Tax also encourages productive use of wealth, discouraging hoarding and motivates reinvestment.Why should some countries avoid it?
Capital flight; wealthy individuals may already have or move money abroad. Making it harder to enforce and administer it. This also lowers the possible investment from the wealthy part of the society and takes away possible economic growth. Another problem is the difficulty to administer/incorporate: hard to accurately value assets like art or private companies, especially this would be hard in countries which already have problems with hidden economy and ‘bureaucratic’ problems. The negative public opinion; double taxation, people already pay tax on income used to buy assets. Moreover this creates problems with investment; a wealth tax may discourage entrepreneurship and savings.
In conclusion, wealth tax can in practice reduce inequality and support welfare, but as previously stated may hurt competitiveness if poorly planned and controlled. Wealth taxes can be beneficial when carefully targeted, with high thresholds and international cooperation to prevent tax evasion. In a world of rising inequality, the debate over wealth tax isn’t about if we should have one, but how to make it fair and effective.
Sources:
www.euronews.com
https://taxsummaries.pwc.com/spain/individual/other-taxes
https://kpmg.com/no/nb.html
More specifically - a wealth tax is imposed on an individual's net worth: the total value of their assets (like property, investments, and savings etc) minus their debts.
It's set in order to reduce the wealth inequality and increase government revenue.
Thus, this essay will try to go over the incentives and disincentives it brings to a country. It will elaborate the positive and negative reasons to adopt this policy using examples like Spain and Norway, as they have such tax implemented.
There is a difference between other types of taxes. Income tax is on earnings of a person; property tax is on real estate; wealth tax is on the total net assets. Typical rates and thresholds of a wealth tax are ~0.1-3%. Assets which are usually taxed are real estate, shares, savings and luxury goods. Most of the time it's a progressive tax – higher the wealth, higher the rate.Impuesto sobre el Patrimonio - is the Spanish example of a wealth tax, which targets individuals with a net worth over €700,000, generating significant revenue for regional governments (areas like Madrid, Catalonia, or Andalusia etc.), and as the idea behind it helps limit extreme wealth concentration. This tax revenue is used to fund public services such as education, healthcare, transport, welfare programs in these areas.
In Norway, it is referred to as formuesskatt. The so-called ‘formuesskatt’ is applied above NOK(Norwegian Kroner) 1.7 million (~€145,000). Unlike the Spanish Impuesto sobre el Patrimonio, it is a mix of both municipal and national (0.7% goes to the municipality, 0.4% to the state), meaning that it is split, part of it is paid to the local government and the other national government of Norway. On the social basis it is widely accepted; contributes to Norway’s strong welfare model and low inequality.
The general analysis for both of the countries show that when combined with transparent administration, adequate rates and social trust, wealth tax can fund welfare without major economic harm.
Why should it be incorporated in other countries?
The main reason is that it reduces inequality; this ensures that even though income tax is progressive, taxation can continue to contribute to reducing inequality, promoting fairness especially in countries with high and growing wealth gaps. The raised revenue tax can fund parts of the economy such as; Healthcare, improving public health, boosts productivity and therefore increases economic growth, reduces long-term government spending as preventing diseases is cheaper than treating them; vaccinations, early diagnosis and overall hygiene of public facilities. Education creates more skilled workers, therefore, decreasing unemployment, increases innovation and in the process leads to building of industries, exports and jobs. Wealth Tax also encourages productive use of wealth, discouraging hoarding and motivates reinvestment.Why should some countries avoid it?
Capital flight; wealthy individuals may already have or move money abroad. Making it harder to enforce and administer it. This also lowers the possible investment from the wealthy part of the society and takes away possible economic growth. Another problem is the difficulty to administer/incorporate: hard to accurately value assets like art or private companies, especially this would be hard in countries which already have problems with hidden economy and ‘bureaucratic’ problems. The negative public opinion; double taxation, people already pay tax on income used to buy assets. Moreover this creates problems with investment; a wealth tax may discourage entrepreneurship and savings.
In conclusion, wealth tax can in practice reduce inequality and support welfare, but as previously stated may hurt competitiveness if poorly planned and controlled. Wealth taxes can be beneficial when carefully targeted, with high thresholds and international cooperation to prevent tax evasion. In a world of rising inequality, the debate over wealth tax isn’t about if we should have one, but how to make it fair and effective.
Sources:
www.euronews.com
https://taxsummaries.pwc.com/spain/individual/other-taxes
https://kpmg.com/no/nb.html
