The US government will not support calls from some major nations for a global wealth tax.

The US is opposed to the idea of a global wealth tax on billionaires, US Treasury Secretary Janet Yellen is reported to have said.

Yellen has rejected an idea floated by Brazil, France and other nations to go after the wealth of the richest people around the world. 

Brazil, which is under a centre-left administration, is now taking the turn of leading the Group of 20 major industrialised countries for 2024. It wants to introduce a global tax to foil efforts by billionaires to minimise tax burdens by residing in low-tax jurisdictions. To an extent, the idea resembles the G20’s support for a global minimum corporate tax rate of 15 per cent, which garnered support from certain countries, but which is being resisted by US and other politicians.

An article in the Wall Street Journal (20 May) quoted Yellen saying that the US would not support talks on this stance.

“We believe in progressive taxation. But the notion of some common global arrangement for taxing billionaires with proceeds redistributed in some way – we’re not supportive of a process to try to achieve that. That’s something we can’t sign on to,” she was quoted as saying. 

Along with ministers from Brazil and France, officials from Spain, Germany and South Africa have discussed a plan that would require billionaires to pay taxes worth at least 2 per cent of their overall wealth every year.

The position of the US is important because, unlike most countries which levy a tax based on residence, the US adopts a worldwide approach, which makes it difficult for American expats to avoid taxes by moving resources abroad.

While wealth taxes have been introduced in a number of countries – even Swiss cantons impose it, at varying rates – some nations, such as France and Sweden, have removed them because the economic damage said to be caused, and the difficulties of collecting it, outweighed any possible benefit. 

In a 6 December 2023 column for Bloomberg, economics writer Allison Schrager wrote: “Very rich people often get that way by starting businesses, and they have a lot of their wealth tied up in their companies. Often these companies are privately owned, and therefore very difficult to value objectively.

“Even for publicly traded assets, the implementation of the tax would not be straightforward. On what day is the tax liability assessed? What if the value of the asset goes down between then and the day the tax is due? Will the government owe the centimillionaires money in the year their assets lose value? The US currently taxes capital gains, where these questions don’t come up or have a clear answer,” she wrote.

An unintended result of a wealth tax, Schrager wrote, is that it might encourage owners of publicly listed firms to keep their businesses private.

(Editor's note: Another argument against wealth taxes is that they tax wealth already created out of income that has been taxed before, and that eventually, eroding the capital of its owners will damage the broader economy. The assumption that it will not cause damage is based on the idea that the state is a better custodian of wealth than the individual – which history suggests is not a very robust claim, to put it gently.)