ReLive Short Cut: A minimum tax on the ultra-wealthy – curse or blessing? Gabriel Zucman in conversation with Jens Südekum

Gabriel Zucman opened the debate by introducing the core concepts of his book Reichensteuer: Aber richtig!, which was recently published in Germany. In his remarks, he underscored the ongoing increase in global wealth inequality. In 1987, the global wealth of billionaires was equivalent to three per cent of global gross domestic product (GDP); today, it equates to around 14 per cent. He argued that this development was worrying, because a concentration of wealth would go hand in hand with a concentration of power.

In light of these developments, Zucman called for a minimum tax on the super-rich. Such a tax should not target income, as the super-rich would often develop targeted strategies to avoid paying income tax. Instead, wealth should be taxed. Specifically, the super-rich with net assets of over EUR 100 million should pay a minimum tax rate of two per cent of their wealth. Zucman argued that this tax rate would give the super-rich a relative tax burden comparable to that of other population groups. He added that any taxes already incurred should be deducted from this tax rate. For example, if someone with assets of over EUR 100 million had already paid taxes equal to two per cent of their wealth, no further taxes would be levied.

„Extreme wealth must come with incompressible duties towards society.“
– Gabriel Zucman

Jens Südekum agreed with Zucman’s diagnosis that growing wealth inequality is a fundamental problem and therefore supported the concept of the so-called ‘taxe Zucman’ in principle. However, he raised two arguments that he felt should be considered.

First, he noted that introducing such a tax would be difficult to implement in the current German coalition. At the same time, he mentioned that the upcoming ruling of the Federal Constitutional Court on inheritance tax could provide an opportunity to generate momentum for reforming the inheritance tax system. He emphasised the urgency of this issue, given the numerous loopholes in the current German inheritance tax system. However, a parallel demand for a wealth tax could jeopardise this initiative. He therefore considered whether an adequate reform of inheritance tax could be a viable alternative to a wealth tax. Südekum also noted that taxing the super-rich after they had emigrated would require extensive changes to international tax agreements. In this context as well, he questioned whether an inheritance tax reform might be easier to implement.

Zucman replied that other countries had already introduced such taxation after emigration. For example, the United States continues to tax its citizens even after they have moved abroad. However, he agreed with Südekum that implementing the changes he proposed would require extensive tax agreements with other countries and long-term planning. In the short term, however, this tax burden could also be levied as a one-off when the super-rich move abroad. He noted that Germany already had a similar ‘exit tax’ in place, which would only need to be reformed, thereby reducing the legislative and administrative burden in the short term. However, Zucman argued that a change in international tax agreements would be necessary in the long term to combat tax evasion appropriately.

Regarding the political implementation, Zucman noted that a tax on the super-rich would in fact be very popular. In France, for example, 86 per cent of the population would support such a tax. Conversely, he argued that inheritance tax would be rather unpopular, particularly in unequal societies, where people would be increasingly attached to the concept of inheritance. He also added that a wealth tax would provide a regular source of public revenue, whereas an inheritance tax would generate the same amount at irregular intervals. Nevertheless, Zucman emphasised the importance of both concepts, concluding that they complement rather than exclude each other.