How Popular are Wealth and Inheritance Taxes?

The research brief, "How Popular are Wealth and Inheritance Taxes?" authored by Ben Ansell and published by the Progressive Politics Research Network at the University of Oxford, explores the shifting dynamics of wealth taxation in the context of growing wealth inequality, particularly following the influential work of Thomas Piketty. This document aims to provide insights into public opinion regarding wealth and inheritance taxes across Europe, especially in light of the pressing need for sustainable housing funding in an era of constrained budgets and aging populations.

In recent decades, the wealth-to-national income ratio has significantly increased, with residential wealth in housing being a primary contributor. For instance, in the UK, the ratio of average house prices to income has escalated from just over four to between seven and nine since the late 1990s. This trend is mirrored across Europe, where countries like Austria, Greece, and the Netherlands have also seen substantial increases in housing prices, raising concerns about housing affordability and creating potential opportunities for new tax revenue.

Despite the apparent fiscal opportunity presented by rising wealth, wealth taxes, particularly inheritance taxes, have been declining in popularity across Europe. Countries such as Austria, Belgium, and Sweden have entirely abolished inheritance taxes, and in the UK, wealth taxes contribute a mere 3% to national income—a figure that has remained stagnant since the 1960s. This decline raises questions about the political viability of wealth taxation as a sustainable funding mechanism for social programs.

Surveys indicate that public perception of wealth taxes is largely negative, with many citizens viewing them as unfair. In 2022, research revealed that taxes on income, such as national insurance and income tax, were considered fairer than those on wealth. Inheritance taxes, in particular, are deeply unpopular, even among individuals unlikely to be affected by them. In seven European countries surveyed, a large majority felt that taxes on smaller and medium estates were excessively high, while support for taxing larger inheritances over €1 million was limited.

Conversely, net wealth taxes aimed at the wealthiest individuals have garnered substantial public support, indicating a potential pathway for revenue generation. However, these taxes face logistical challenges and the risk of evasion. Experimental studies suggest that how inheritance taxes are framed can significantly influence public opinion. Describing them as "death taxes" or "double taxation" reduces support, while linking tax revenues to tangible benefits like lower income taxes or enhanced public services increases acceptance.

The research underscores the challenges that proponents of wealth taxation face in Europe, particularly in light of public skepticism. While there is a clear appetite for targeting the ultra-wealthy, successful implementation will require clear communication about the benefits of such taxes to the public. For wealth taxes to be politically viable and sustainable, they must be connected to visible and direct benefits that resonate with the electorate, thus providing a viable funding source for sustainable housing and social welfare initiatives.