The wealth tax is back in fashion, but Europe has been here before

Friday 30 January 2026

A wealth tax sounds, at first hearing, like an elegant policy. If inequality has widened, if asset prices have surged ahead of wages, and if governments are short of money for defence, reconstruction, energy transition and the simple maintenance of public services, then why not tax accumulated wealth rather than labour? Yet the European record of wealth taxes is one of enthusiasm followed by repeal, and Sweden’s experience remains the clearest cautionary tale.

Sweden abolished her net wealth tax with effect from 1 January 2007. PwC’s country tax summary records that fact plainly, in the same breath as the absence of inheritance and gift taxes in Sweden today. The political economy behind the decision was less plain, and more instructive. Wealth taxes are rarely defeated by arguments about fairness. They are defeated by arguments about feasibility, flight and collateral damage to domestic investment.

Europe’s debate in the current climate, therefore, is not a simple argument over whether the rich should pay more. It is a more technical, and more political, argument over which instruments can raise revenue from wealth holders without encouraging avoidance, out-migration, or a shift from productive investment into defensive financial engineering.

What exactly is a wealth tax?

A great deal of public argument is muddied by terminology. There are at least four distinct ideas that are often bundled together:

1. A net wealth tax: an annual tax on an individual’s net assets, typically above a high threshold.

   
   

2. A property or real estate wealth tax: a tax focused on real estate holdings, sometimes framed as a wealth tax but narrower in scope. France’s IFI, introduced in 2018 to replace the broader ISF, is the classic example. 

   
   

3. A tax on capital income and gains: higher rates on dividends, interest and capital gains, sometimes paired with anti-avoidance rules to limit reclassification.

   
   

4. Wealth transfer taxes: inheritance, estate and gift taxes.

When commentators say “wealth taxes” are returning, they often mean any mixture of these. When governments design policy, they are forced to choose. And those choices matter.

Sweden’s lesson: political consensus forms when the tax bites the “mobile” wealthy

Sweden’s abolition is often narrated as a moral retreat. In reality, it reflected a calculation about the mobility of capital and persons in a high-tax, open economy. A net wealth tax is difficult to sustain when those paying it can credibly threaten to leave, to shift assets abroad, or to restructure ownership so that valuation becomes contestable.

A net wealth tax has two built-in vulnerabilities:

• Valuation and administrability. Illiquid assets, private companies, art and complex financial instruments do not present themselves in neat, annual tax-return numbers. Even where valuation is possible, it becomes litigable. The OECD has analysed net wealth taxes in terms of efficiency, equity and administration, precisely because administration tends to dominate the real-world outcomes. 

  
  

• Liquidity. People can be “wealthy” on paper but cash-poor. This is particularly acute for founders and owners of medium-sized businesses: the wealth is in the company, but the tax is due in cash.

Once those two vulnerabilities are widely perceived, a political coalition can form that is broader than the ultra-rich. Entrepreneurs, farmers, family businesses and even professionals with illiquid property holdings can become uneasy allies, and parties that might otherwise support redistribution become anxious about growth.

That dynamic is not uniquely Swedish. It is structural.

The European landscape in 2025: net wealth taxes are the exception, not the norm

If one looks at net wealth taxes in the strict sense, Europe is not experiencing a broad revival. Tax Foundation’s 2025 survey argues that only a small handful of European countries levy a net wealth tax, naming Norway, Spain and Switzerland. 

That fact alone reframes the debate. Europe, in aggregate, has been moving away from broad, annual net wealth taxes for decades, even whilst keeping or expanding other forms of wealth-related taxation. France narrowed her wealth tax to real estate through the IFI. Other countries have strengthened capital gains taxation, tightened residency rules, or experimented with special regimes for attracting wealthy residents, which in turn intensifies political resentment amongst those who cannot move so easily.

In other words Europe’s direction has been to tax wealth in more targeted ways, and to compete for, rather than repel, particular categories of high net worth residents.

Norway and Spain: the two contemporary stress tests

Norway is often held up as proof that a net wealth tax can work, and as proof that it cannot.

Reuters recently described Norway’s strengthened wealth tax regime as trading millionaires for equality: an explicit acknowledgement of the political choice. Reuters reported that a significant number of wealthy individuals left Norway in 2022–2023, while the tax nevertheless raised meaningful revenue as a share of GDP. Norway’s experience underscores the central tension: a wealth tax can raise revenue and appeal to egalitarian instincts, but it risks pushing away precisely the people who fund and build domestic firms, especially in sectors where capital is scarce.

Spain has taken a different route, layering a “solidarity tax on large fortunes” alongside her existing wealth tax architecture. Professional tax summaries note that the solidarity tax, initially presented as temporary, has been extended through subsequent years. Spain’s approach demonstrates a second European pattern: using wealth taxes not only as revenue instruments but as political symbols, often aimed at wealthy concentrations in particular regions.

Both cases show that wealth taxes, once introduced or strengthened, become part of a broader political drama about fairness, regional identity and the legitimacy of the state.

Why wealth taxes are politically tempting in 2026

Europe’s current economic climate provides three powerful motivations for renewed interest:

1. Fiscal pressure and visible deficits. When budgets are strained, governments search for bases that appear under-taxed. Recent French debates about taxing high earners and wealthy households, and the reported underperformance of certain measures, illustrate how quickly the argument turns from principle to revenue reality. 

   
   

2. Asset inflation and intergenerational resentment. Housing and equity market gains, combined with stagnating real wages in parts of Europe, have increased the sense that wealth, not work, is the primary engine of advantage.

   
   

3. Defence and security. In the shadow of Europe’s security crisis, arguments about “shared sacrifice” are more politically resonant than they were in the low-interest-rate decade.

Wealth taxes are therefore tempting because they appear to align fairness with fiscal necessity. The danger is that they can fail at either or both.

The economics: the argument is less about fairness than about incidence and behaviour

Economists who support wealth taxation tend to make three claims:

• Wealth is more concentrated than income, so taxing wealth targets inequality more directly.

  
  

• A modest annual wealth tax can function as a backstop when capital income taxation is undermined by avoidance or by low realised income amongst the very wealthy.

  
  

• In a world of large inherited fortunes, wealth taxation can be framed as a contribution for the stability and institutions that protect property.

Economists who oppose it emphasise, instead:

• Behavioural response. The wealthy can move, or can structure. Tax design determines whether a wealth tax is a revenue instrument or a provocation.

  
  

• Double taxation. Wealth is usually accumulated from taxed income and gains. Opponents argue that a wealth tax can become a repeated levy on the same underlying value, irrespective of annual returns.

  
  

• The entrepreneurial penalty. A wealth tax can hit founders hardest because their wealth is illiquid and tied to growth companies.

The IMF, in an important practical note on how to tax wealth, treats the issue as one of instrument choice: taxing returns (capital income), taxing stocks (net wealth), and taxing transfers (inheritance). It is, implicitly, a reminder that “wealth taxation” is a menu, not a single dish. 

A new direction: international coordination aimed at the ultra-wealthy

Where Europe does appear to be moving towards wealth taxation is not through universal net wealth taxes, but through coordinated efforts aimed at ultra-high-net-worth individuals.

A European Parliament briefing on taxing ultra-high-net-worth individuals notes that G20 leaders encouraged cooperation to ensure that such individuals are taxed effectively, and that the European Commission has launched work on the effectiveness of wealth-related taxes. Parallel to this a widely discussed proposal associated with economist Gabriel Zucman suggests a coordinated minimum effective tax, framed as a percentage of wealth, with estimates of substantial potential revenues. 

This matters because it hints at a politically viable compromise:

• Do not impose a broad net wealth tax that catches large numbers of “asset rich, cash poor” households.

  
  

• Do, instead, construct a backstop for the very top, where the administrative burden is manageable and the political legitimacy is easier to maintain.

Whether such coordination will succeed is uncertain. Yet it represents an acknowledgement of the central weakness of national wealth taxes: mobility.

Should Europe move towards or away from wealth taxes?

Europe should be sceptical of reintroducing broad net wealth taxes in the Swedish-era sense. The evidence from the European policy map suggests that most countries have already decided, implicitly, that the administrative and behavioural costs outweigh the benefits, and have moved towards narrower or alternative instruments. Sweden’s abolition remains a symbol of that judgement. 

But Europe should not interpret that scepticism as a reason to abandon the attempt to tax wealth fairly.

A sensible European direction in the current climate would combine five elements:

1. Strengthen and simplify capital income and capital gains taxation, with anti-avoidance rules that reduce reclassification of labour into capital income.

   
   

2. Rebuild credible inheritance and gift taxation where it has withered, with careful exemptions for genuine family business continuity.

   
   

3. Use property taxation, including well-designed real estate levies, to capture immobile wealth bases, while protecting liquidity through deferral mechanisms where appropriate.

   
   

4. Invest in tax administration capacity and information exchange, because enforcement often yields more than new rates. 

   
   

5. Pursue international coordination for the ultra-rich, where mobility is greatest and national solutions are weakest. 

In practical terms, that is movement away from the classic net wealth tax, and towards a layered system of wealth-related taxation that is administrable, politically defensible, and less prone to capital flight.

The real question is legitimacy

The wealth tax argument is ultimately a proxy for a deeper concern: whether Europe’s social model can retain legitimacy under fiscal strain and security threat. If governments ask ordinary citizens to accept higher taxes, weaker services or prolonged austerity, whilst visibly failing to tax concentrated wealth effectively, social trust will erode.

Sweden’s abolition of her wealth tax is often treated as an ending. It is better understood as a warning: that a wealth tax which cannot be administered, and cannot withstand the credible exit options of those it targets, becomes a political liability. Europe’s task now is not to resurrect a policy instrument that has repeatedly broken, but to design a modern suite of wealth-related taxes that recognises mobility, valuation realities, and the urgent need for revenue that citizens will accept as fair.