In July, a group of 83 of the world’s richest people calling itself Millionaires for Humanity urged governments to increase taxes on them to help deal with the economic fallout from the COVID-19 pandemic.
Their idea, the latest version of a wealth tax—where the rich are taxed on the assets they already own, rather than their earnings—was received as almost revolutionary. This year, figures from onetime U.S. presidential candidate Bernie Sanders to U.K. Shadow Chancellor Anneliese Dodds have likewise called for the exploration of a wealth tax, making it one of the most popular and seemingly new policy ideas on both sides of the Atlantic.
Although wealth taxes may seem bold and innovative, however, the concept is almost as old as money itself. Indeed, the first known currency was created by King Alyattes in Lydia, modern-day Turkey, in 600 B.C. The ancient Greeks implemented a wealth tax just a century later. Since then, there have been wealth taxes in various countries right through to the present day. The problem is that their implementation has often been unsuccessful, with many countries having moved away from them recently. In fact, in 1990, 12 countries in the Organization for Economic Cooperation and Development had a wealth tax. By 2018, only three still had the tax intact.
In other words, wealth taxes are not quite as revolutionary as some imagine. Nor will they disrupt or end capitalism, as champions like the left-wing commentator Paul Mason and critics like the National Taxpayers Union Foundation allege. But they can reform it. And for a modern wealth tax to be more successful than its predecessors, it must be implemented in a way that gains support from the rich rather than simply incentivizing those with the means to take their capital elsewhere.