Germany Proposes A 1% Tax On The Assets Of The Rich

Neuschwanstein Castle Germany

Photo: Wikimedia Commons

Two opposition parties in Germany, the centre-left Social Democrats and environmentalist Greens, have voiced support for a 1% “wealth tax” on the assets of over €2 million (about $2.5 million), Der Spiegel reports.The tax’s supporters say that the tax would be small enough for the wealthy to barely notice, but large enough to provide an estimated €11.5 billion annually for the federal budget. So far Merkel’s coalition government has refused to consider the tax, but its possible that position may change before the next federal election in 2013.

A wealth or asset tax isn’t an outlandish idea for Germany — it actually has one already, but it has not actually been implemented since 1997. France already has a similar tax plan, known as the ‘L’impôt de solidarité sur la fortune’, as does Iceland, Norway, the Netherlands and India.

The German opposition appear to be looking next door for ideas: France is planning to impose a 75% income tax rate on top earners next year. The tax was a key part of Francois Hollande’s success in this year’s elections, appealing to a spirit of egalitarian populism that has sprung up in the wake of the financial crisis, but many observers have balked at the implications of the tax — David Cameron has said the UK will “roll out the red carpet” for the wealthy French who leave the country after ther tax is implicated, and Haley Barbour has told French millionaires to pack up their lives and businesses and move to Mississippi.

A wealth tax also has its fair share of doubters — a 2006 Washington Post article argued that France’s assets tax resulted in capital flight and a subsequent loss in government income, and a Dutch study pointed out that asset taxes have far higher administrative costs than income taxes.

However, asset taxes have had some unlikely supporters too — in 1999 Donald Trump proposed a one-off asset tax of 14.25% on the assets of those with a net worth of over $10 million.

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