From California to Rhode Island, state lawmakers are championing wealth taxes and millionaire surcharges, with several proposals heading to voters this November. But before embracing these measures, policymakers should look across the Atlantic—where the track record is clear: wealth taxes don't work.
The debate often centers on fairness: tax the rich to fund programs for the many. But the more pressing question is whether these taxes actually deliver. History suggests they don't. The Organization for Economic Cooperation and Development reports that among the five OECD countries still levying net wealth taxes, revenue averaged just 1.5% of total tax receipts in 2020. In Switzerland, it was 5.12%; in France, a mere 0.19%. The reason: administering wealth taxes is a bureaucratic nightmare.
Legal and Economic Pitfalls
Legal challenges also loom. In Europe, a court ruling forced the Netherlands to overhaul its wealth tax. In the U.S., the Supreme Court's 2024 decision in Moore v. U.S. did not open the door for broad wealth taxes, as some advocates claim. The ruling upheld longstanding corporate income tax principles, not a green light for taxing unrealized gains. Interpreting it otherwise would require an extremely broad reading of the 16th Amendment.
Even if legal hurdles are cleared, the economic consequences are severe. An OECD report found that wealth taxes stifle entrepreneurship and risk-taking, undermining innovation and long-term growth. That's likely why 12 OECD countries had wealth taxes in 1996, but only five still do today. The rest abandoned them.
State-Level Stakes
U.S. states pushing ahead should expect similar outcomes. In Washington State, a proposed millionaire tax would push the combined state and local top rate above 18%—the highest in the nation. Michigan's proposed hike would have raised the top rate to over 9%, costing 43,000 jobs and shrinking the economy by $8.5 billion, according to the Tax Foundation. California's initiative, if passed, could drive Silicon Valley talent elsewhere, leaving empty office parks.
Two hundred fifty years ago, Adam Smith outlined four canons of taxation, including certainty and efficiency. In recent years, many states have moved toward simpler, flatter income tax structures—a trend that has boosted revenue, jobs, and investment. Wealth taxes run counter to that progress.
As more states consider these measures, the European experience offers a clear warning: wealth taxes generate unreliable revenue, invite legal fights, and harm economic growth. Policymakers would do well to avoid repeating those mistakes.
Daniel Bunn is president and CEO of the Tax Foundation.
