{"id":31647,"date":"2025-08-15T11:00:47","date_gmt":"2025-08-15T10:00:47","guid":{"rendered":"https:\/\/research.reading.ac.uk\/research-blog\/?p=31647"},"modified":"2025-08-15T08:45:28","modified_gmt":"2025-08-15T07:45:28","slug":"wealth-taxes-dont-always-work-the-way-governments-hope-they-will-here-are-some-alternatives","status":"publish","type":"post","link":"https:\/\/research.reading.ac.uk\/research-blog\/2025\/08\/15\/wealth-taxes-dont-always-work-the-way-governments-hope-they-will-here-are-some-alternatives\/","title":{"rendered":"Wealth taxes don\u2019t always work the way governments hope they will. Here are some alternatives"},"content":{"rendered":"<p>[vc_row][vc_column][vc_single_image image=&#8221;31649&#8243; img_size=&#8221;large&#8221; add_caption=&#8221;yes&#8221;][vc_column_text]With the UK government facing a multibillion pound gap between\u00a0<a href=\"https:\/\/www.itv.com\/news\/2025-08-06\/labour-set-to-break-manifesto-tax-pledge-says-leading-economic-think-tank\">revenue and spending<\/a>, calls for a wealth tax are becoming louder.<\/p>\n<p>More than 30\u00a0<a href=\"https:\/\/taxjustice.uk\/blog\/leading-economists-call-for-a-wealth-tax-in-the-uk\/\">top economists<\/a>\u00a0recently wrote to the chancellor of the exchequer, Rachel Reeves, saying the measure could raise billions of pounds. A\u00a0<a href=\"https:\/\/yougov.co.uk\/topics\/politics\/survey-results\/daily\/2025\/07\/08\/3086a\/1\">recent poll<\/a>\u00a0of more than 4,000 UK adults found that 75% would back a 2% tax on wealth above \u00a310 million.<\/p>\n<p>Economic insecurity, rising living costs and the rapid pace of de-industrialisation have been identified as causes\u00a0<a href=\"https:\/\/www.bbc.co.uk\/news\/articles\/c0563g12npgo\">of unrest<\/a>\u00a0and a fraying society. Targeting taxes at the ultra-rich could have the power to redistribute wealth and raise revenue on a substantial scale.<\/p>\n<p>But the reality of implementing it is far from simple. While the concept may be compelling, a wealth tax might not be easy to put into action \u2013 and may not even create the expected revenue.<\/p>\n<p>This is reflected in figures from the\u00a0<a href=\"https:\/\/www.oecd.org\/en\/publications\/the-role-and-design-of-net-wealth-taxes-in-the-oecd_9789264290303-en.html#page65\">Organisation for Economic Co-operation and Development<\/a>\u00a0(OECD) that show wealth taxes are less common than they used to be. Of the 12 OECD countries that had a net wealth tax in 1990,\u00a0<a href=\"https:\/\/taxfoundation.org\/data\/all\/eu\/wealth-taxes-europe\/\">just three have one now<\/a>\u00a0(Norway, Spain and Switzerland).<\/p>\n<p>Taxing assets including savings, investments and property is harder than taxing income. It relies on very wealthy individuals self-declaring asset values and for all assets to be held under the same name. When it comes to properties, this is not always the case.<\/p>\n<p>A lack of transparency and reliable data can then create a huge administrative burden and costs for the government imposing the tax.<\/p>\n<p>After all, predicting the political and economic impact these taxes can have is difficult. A clear example is the UK government\u2019s proposed change to inheritance tax rules for farmers.<\/p>\n<p>This may be\u00a0<a href=\"https:\/\/theconversation.com\/changes-to-farmers-inheritance-tax-are-fair-and-could-even-help-them-in-the-long-run-expert-view-244958\">a well-intentioned policy<\/a>\u00a0aimed at a small number of ultra-wealthy individuals using farmland to avoid inheritance tax. But claims that it affects farming families who may not have high incomes but have cultivated their land for generations have sparked heated debate around the actual figure of\u00a0<a href=\"https:\/\/www.bbc.com\/news\/articles\/c789yggdxn3o\">farms affected<\/a>.<\/p>\n<p>Despite the potential difficulties in implementation, there are countries that have made a wealth tax work.\u00a0<a href=\"https:\/\/www.lifeinnorway.net\/wealth-tax\/\">In Norway<\/a>, residents pay 1% tax on their global net worth above 1.76 million kroner (\u00a3130,000). But the calculations are far from simple \u2013 with caveats, exemptions and differentiated local rules.<\/p>\n<p>For net wealth in excess of 20.7 million krone in 2023, the maximum wealth tax rate was increased to 1.1%. This led to some of Norway\u2019s wealthiest people moving to countries with more favourable tax regulations.<\/p>\n<p><a href=\"https:\/\/fortune.com\/europe\/2024\/04\/19\/wealthy-norwegians-flee-to-switzerland-to-evade-high-wealth-taxes-bankers-following-dnb-abg-sundal-collier\/\">Fortune<\/a>\u00a0reported that 82 Norwegians with a combined net wealth of about 46 billion kroner (\u00a33.4 billion) left the country in 2022-2023, according to data from the country\u2019s finance ministry.[\/vc_column_text][vc_column_text]<\/p>\n<h2>What else might work?<\/h2>\n<p>Any solution must be focused on the ultra-rich \u201cgiving back\u201d, reinvesting in the economy for the good of society, and shifting their mindset.<\/p>\n<p>With the reality of a wealth tax proving difficult, here are some viable alternatives to raise revenues and social contributions from very wealthy individuals.<\/p>\n<h3><strong>1. Revised tax on capital gains<\/strong><\/h3>\n<p>An increase of capital gains taxation (tax levied on the profits made when someone sells an asset) may be needed. But while revisions are overdue \u2013 perhaps\u00a0<a href=\"https:\/\/www.nber.org\/papers\/w32951\">differentiating between wealth sources<\/a>\u00a0such as entrepreneurial effort, passive investment and speculative trading \u2013 this tax would rely on the ultra-rich selling their assets. Many buy by borrowing against them and avoid cashing them out, so wealth accumulates without being taxed.<\/p>\n<p>A higher and more progressive tax on capital gains could be an initial solution to raise revenues. But if poorly designed, it may not be a long-term answer and could discourage some much-needed productive capital investments in the UK.<\/p>\n<h3><strong>2. A fresh look at inheritance tax<\/strong><\/h3>\n<p>Loopholes and exemptions allow some very wealthy families to slash their inheritance tax bills, in some cases allowing vast properties and assets to be passed on untouched.[\/vc_column_text][vc_single_image image=&#8221;31650&#8243; img_size=&#8221;large&#8221; add_caption=&#8221;yes&#8221;][vc_column_text]<a href=\"https:\/\/doi.org\/10.1093\/restud\/rdac016\">Academic research<\/a>\u00a0shows how higher wealth inequality stems from inherited wealth. Unlike financial capital, inherited wealth does not often translate into investments and, as such, citizens generally\u00a0<a href=\"https:\/\/doi.org\/10.1016\/j.jpubeco.2020.104207\">favour taxing it<\/a>. In 2024, the\u00a0<a href=\"https:\/\/ifs.org.uk\/articles\/raising-revenue-closing-inheritance-tax-loopholes\">Institute for Fiscal Studies<\/a>\u00a0published suggestions on how to revise inheritance tax in the UK. Now is the time for wider consultation on this.<\/p>\n<h3><strong>3. Incentivised philanthropy<\/strong><\/h3>\n<p>The underlying premise of a wealth tax is to tackle social and economic inequality. Incentivised philanthropy could also provide a way to give a direct and impactful boost to those areas of society that need it most.<\/p>\n<p>Rather than going straight into a government pot, investing wealth into specific initiatives that effect real change and give measurable outcomes could be an alternative solution. This could be, for instance, supporting education among deprived communities with scholarships, or paying for upgrades to local infrastructure.<\/p>\n<p>Philanthropic initiatives can also be valuable to the wealthy individuals behind them in terms of reputational gains and publicity for their business.<\/p>\n<p>The benefits and pitfalls of a wealth tax will continue being discussed in the run up to the budget in autumn. But it\u2019s important not to lose sight of the end goal \u2013 reducing inequality.<\/p>\n<p>It is time for the wealthiest to recognise that their fortunes sit in a country where poverty is real and increasing. They could drive a rebalancing that does not feel punitive, but ethical.[\/vc_column_text][\/vc_column][\/vc_row][vc_row][vc_column][vc_column_text]<span style=\"letter-spacing: 0.08px;\"><a href=\"https:\/\/www.icmacentre.ac.uk\/people\/miriam-marra\" target=\"_blank\" rel=\"noopener\">Dr Miriam Marra<\/a> is an Associate Professor of Finance at the <a href=\"https:\/\/www.icmacentre.ac.uk\/\" target=\"_blank\" rel=\"noopener\">ICMA Centre<\/a> and Co-Director of Equity, Diversity, and Inclusion at Henley Business School, University of Reading.<\/span><\/p>\n<p><span style=\"letter-spacing: 0.08px;\">This article is republished from <\/span><a style=\"letter-spacing: 0.08px;\" href=\"https:\/\/theconversation.com\/\">The Conversation<\/a><span style=\"letter-spacing: 0.08px;\">\u00a0under a Creative Commons license. Read the\u00a0<\/span><a href=\"https:\/\/theconversation.com\/wealth-taxes-dont-always-work-the-way-governments-hope-they-will-here-are-some-alternatives-262387\" target=\"_blank\" rel=\"noopener\">original article.<\/a>[\/vc_column_text][\/vc_column][\/vc_row]<\/p>\n","protected":false},"excerpt":{"rendered":"<p>[vc_row][vc_column][vc_single_image image=&#8221;31649&#8243; img_size=&#8221;large&#8221; add_caption=&#8221;yes&#8221;][vc_column_text]With the UK government facing a multibillion pound gap between\u00a0revenue and spending, calls for a wealth tax are becoming louder. More than 30\u00a0top economists\u00a0recently wrote to the&#8230;<a class=\"read-more\" href=\"&#104;&#116;&#116;&#112;&#115;&#58;&#47;&#47;&#114;&#101;&#115;&#101;&#97;&#114;&#99;&#104;&#46;&#114;&#101;&#97;&#100;&#105;&#110;&#103;&#46;&#97;&#99;&#46;&#117;&#107;&#47;&#114;&#101;&#115;&#101;&#97;&#114;&#99;&#104;&#45;&#98;&#108;&#111;&#103;&#47;&#50;&#48;&#50;&#53;&#47;&#48;&#56;&#47;&#49;&#53;&#47;&#119;&#101;&#97;&#108;&#116;&#104;&#45;&#116;&#97;&#120;&#101;&#115;&#45;&#100;&#111;&#110;&#116;&#45;&#97;&#108;&#119;&#97;&#121;&#115;&#45;&#119;&#111;&#114;&#107;&#45;&#116;&#104;&#101;&#45;&#119;&#97;&#121;&#45;&#103;&#111;&#118;&#101;&#114;&#110;&#109;&#101;&#110;&#116;&#115;&#45;&#104;&#111;&#112;&#101;&#45;&#116;&#104;&#101;&#121;&#45;&#119;&#105;&#108;&#108;&#45;&#104;&#101;&#114;&#101;&#45;&#97;&#114;&#101;&#45;&#115;&#111;&#109;&#101;&#45;&#97;&#108;&#116;&#101;&#114;&#110;&#97;&#116;&#105;&#118;&#101;&#115;&#47;\">Read More ><\/a><\/p>\n","protected":false},"author":991,"featured_media":31649,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"__cvm_playback_settings":[],"__cvm_video_id":"","footnotes":""},"categories":[25],"tags":[2277,363,2853,1161,2854],"class_list":["post-31647","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-prosperity-resilience","tag-feature","tag-finance","tag-taxation","tag-uk-economy","tag-wealth-tax"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.8.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Wealth taxes don\u2019t always work the way governments hope they will. 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Here are some alternatives - Connecting Research\" \/>\n<meta property=\"og:description\" content=\"With the UK government facing a multibillion pound gap between revenue and spending, calls for a wealth tax are becoming louder.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/research.reading.ac.uk\/research-blog\/2025\/08\/15\/wealth-taxes-dont-always-work-the-way-governments-hope-they-will-here-are-some-alternatives\/\" \/>\n<meta property=\"og:site_name\" content=\"Connecting Research\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/theuniversityofreading\/\" \/>\n<meta property=\"article:published_time\" content=\"2025-08-15T10:00:47+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-08-15T07:45:28+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/research.reading.ac.uk\/research-blog\/wp-content\/uploads\/sites\/72\/2025\/08\/david-hellmann-ZDeQTKPb4eI-unsplash.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"2560\" \/>\n\t<meta property=\"og:image:height\" content=\"1707\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Vessy Harizanova\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@UniRdg_Research\" \/>\n<meta name=\"twitter:site\" content=\"@UniRdg_Research\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Vessy Harizanova\" \/>\n\t<meta name=\"twitter:label2\" content=\"Estimated reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/research.reading.ac.uk\/research-blog\/2025\/08\/15\/wealth-taxes-dont-always-work-the-way-governments-hope-they-will-here-are-some-alternatives\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/research.reading.ac.uk\/research-blog\/2025\/08\/15\/wealth-taxes-dont-always-work-the-way-governments-hope-they-will-here-are-some-alternatives\/\"},\"author\":{\"name\":\"Vessy Harizanova\",\"@id\":\"https:\/\/research.reading.ac.uk\/research-blog\/#\/schema\/person\/d049d3317a6366304f6cab16d2db7a93\"},\"headline\":\"Wealth taxes don\u2019t always work the way governments hope they will. 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