How Popular are Wealth and Inheritance Taxes?

This research brief, authored by Ben Ansell and published by the Progressive Politics Research Network at the Nuffield Centre, explores the popularity of wealth and inheritance taxes in the context of rising wealth inequality. Following Thomas Piketty's influential work, many centre-left policymakers are considering wealth taxes as a potential solution to fiscal constraints exacerbated by aging populations and increasing housing prices across Europe.

The brief highlights the significant increase in the wealth-to-national-income ratio in recent decades, particularly in residential housing. For instance, in the UK, the average house price-to-income ratio has surged from around four in the mid-1990s to between seven and nine in recent years. Other European countries, such as Austria and Portugal, have seen similar trends, with housing prices rising by 15% and nearly 50%, respectively, since 2015. This presents an opportunity for governments to tax the windfall received by older generations benefitting from the housing boom to fund social programs.

Despite the apparent need for wealth taxes, the brief notes that such taxes have become increasingly unpopular across Europe. Inheritance taxes, once a staple of wealth taxation, have been reduced or eliminated in several countries, including Austria and Sweden. In the UK, wealth taxes account for only about 3% of national income, a figure that has remained stable since the 1960s. This reflects a broader trend where wealth taxes are viewed with skepticism by the public, who tend to prefer taxes on income.

Survey data presented in the brief reveals that the public perceives income taxes as fairer compared to wealth taxes, which are often seen as unfair. Inheritance tax is particularly disliked, even among individuals unlikely to ever pay it. In a survey across seven European countries, many respondents believe inheritance taxes on smaller estates are overly burdensome, while support for taxing larger inheritances over €1 million is limited.

Conversely, there is notable public support for net wealth taxes targeting the wealthiest households. Although logistical challenges exist in implementing such taxes, the brief indicates that they could be politically viable if public benefits are clearly communicated. For instance, linking the revenues from wealth taxes to lower income taxes or increased funding for essential services like healthcare could enhance acceptance among the public.

The research also emphasizes that the framing of inheritance taxes significantly influences public opinion. Describing inheritance tax as a "death" or "double" tax tends to decrease support, while framing it as a means to fund public goods can increase acceptance. This suggests that proponents of wealth taxation need to clearly articulate the benefits to the public to shift attitudes favorably.

In summary, while wealth taxes present a potential avenue for funding social programs amid fiscal constraints, their current unpopularity poses a significant challenge. The brief underscores the necessity for clear communication about the benefits of such taxes, particularly in the context of sustainable housing initiatives. By addressing public concerns and demonstrating the direct advantages of wealth taxation, policymakers may find a pathway to create a more equitable fiscal landscape.