How Popular are Wealth and Inheritance Taxes?

In the research brief "How Popular are Wealth and Inheritance Taxes?" published by the Progressive Politics Research Network, Ben Ansell explores the increasing interest in wealth taxes across Europe, particularly in the context of sustainable housing. This analysis is crucial as it provides insights into how taxation can be leveraged to tackle wealth inequality while supporting broader social programs.

Wealth taxes have gained traction among centre-left thinkers as a response to rising wealth inequality, especially after Thomas Piketty's influential work. The significant increase in the wealth-to-national-income ratio, particularly in housing, poses a compelling case for wealth taxation. For instance, the UK has seen the ratio of average house prices to incomes rise from just over four in the mid-1990s to between seven and nine in recent years. This trend highlights the urgency for new funding sources for crucial initiatives like sustainable housing.

Despite the apparent need for wealth taxation, inheritance taxes remain highly unpopular across Europe. Many countries have witnessed a decline in these taxes, with some, like Austria and Sweden, abolishing them entirely. In the UK, wealth taxes account for only about 3% of national income, a figure that has not changed substantially since the 1960s. Public opinion surveys indicate that taxes on income are perceived as fairer than those on wealth, with inheritance tax garnering particularly negative views, even among those unlikely to pay it.

Surveys conducted across seven European nations reveal that large majorities consider inheritance taxes on smaller and medium estates to be "too high." Limited support exists for taxing inheritances above €1 million. Conversely, net wealth taxes targeting the very wealthy enjoy considerable public backing, although they face logistical challenges and potential evasion. The report underscores that while the public may support wealth taxes, particularly on the affluent, there is a significant need to clarify the intended use of the revenues to enhance acceptance.

The framing of wealth taxes significantly influences public attitudes. Describing inheritance taxes as "death" or "double" taxes tends to decrease support, while linking the tax revenues to tangible benefits, such as reduced income taxes or increased public spending on essential services, enhances acceptance. Notably, appeals to social fairness alone have shown little effectiveness in shifting public sentiment.

The brief concludes that while wealth taxes hold potential for addressing fiscal pressures in the context of sustainable housing, they face considerable public skepticism. To effectively tap into this potential, proponents of wealth taxation must articulate clear benefits to the public, ensuring that the revenues generated are seen as contributing to societal welfare. This approach could ultimately foster greater support for wealth taxes as a viable means of funding sustainable housing initiatives across Europe.