The rich are getting richer so why no wealth tax?

Around the world, the rich are getting richer, with soaring stock markets and other asset values lining their pockets. So why – in most countries – is there no wealth tax? True, most tax systems do tax wealth in specific ways, such as charges on property or capital gains. But straight-up wealth taxes – an annual charge on the value of the assets held – are rare.But with exchequers worldwide searching for cash, taxing wealth is coming back on to the agenda. A new report from the Economic and Social Research Institute (ESRI) crunches the numbers and outlines the key choices facing Irish policymakers. It shows that there is a lot of wealth in Ireland which could be taxed, but raising a significant amount of money requires big political decisions. READ MOREFor Ireland, as for other countries the choice is whether a wealth tax would be for show – a political signal that the wealthiest should pay a bit more – or for dough, in other words to actually raise a significant amount of money for the exchequer. Higher wealth – fewer wealth taxes One of the peculiarities of recent years is that while the wealth of the billionaire class has risen worldwide, the number of countries with wealth taxes has shrunk. The ESRI report points out that 12 European countries levied an annual tax on net wealth in 1990 compared with only Norway, Spain and Switzerland in 2025. Low revenue yields, administrative challenges and concerns that capital would move to other countries are among the reasons cited for countries abandoning the taxes.Microsoft president Brad Smith: Ireland is “well-positioned for future of AI”France abolished its wealth tax in 2018, citing fears of wealth moving out of the country, and replaced it with a tax on real estate worldwide assets valued at over €1.3 million. Despite rising wealth, the key message is that full-scale wealth tax are not easy to design and implement.Wealth in Ireland Household wealth in Ireland, as measured by the Central Statistics Office Household Finance and Consumption Survey in 2023, was €927 billion, about two-and-a-half-times higher than a decade earlier. That is an average (median) net wealth of just under €256,000 per household, with the family home the main asset for the vast majority. Where a mortgage is still outstanding, this is subtracted from the net wealth figures. The story of Irish assets over the past decade can be told in a few headlines – rising house prices are the key factor, followed by lower household debt as the Celtic Tiger loans are paid down, and a rise in business assets among the better off. The top 10 per cent still controls close to 50 per cent of wealth. It is worth noting, also, that separate Central Bank data, which showed wealth just over €1 billion early 2023 – a bit higher than the CSO- estimated it at being over €1.42 billion in the first quarter of this year. A chateaux in the Côte d'Azur. France abolished its wealth tax in 2018. Taxing questionsAssets are taxed in Ireland via a few routes, notably capital gains tax and capital acquisitions tax on inheritance and gifts.However, even if you add the amounts collected via these taxes to stamp duty and local property tax – which operates more like a charge – the total revenue comes to less than €6 billion in 2025 out of total tax revenue of over €105 billion. Could a wealth tax increase the revenue significantly?Well, it depends. The key insight from the ESRI paper was that if an Irish wealth tax was going to raise significant money, then it would have to have a wide base – in other words most assets would have to be included. If this happened, then even if the tax kicked in at relatively high wealth levels, significant sums could be raised.The political problem is that a broad base takes in areas like businesses, farms and the family home. If all wealth in the State were taxed at 1 per cent, the yield would be €9.3 billion based on the 2023 figures, and probably over €10 billion now. This is not a realistic scenario, but it provides a kind of benchmark. The researchers go through a range of scenarios, with the widest possible tax base, one excluding the family home and a narrow definition including mainly financial assets and investment property. Cut-off point above which wealth would be taxed range from €250,00 to €2 million, with these figures doubled for a married couple. In all cases the tax rate is 1 per cent and pensions are excluded.Three lessonsThe first – and most striking – lesson is the importance of the range of assets covered. Exempting the family home, businesses and farms cuts the pot significantly. At a threshold of €500,000 for example – which would be €1 million for a married couple – a narrow base just including financial assets and other investments would raise less than €450 million per annum, while one including all assets would raise close to €3 billion. The second lesson is not surprising; it is that as the threshold lowers for the wealth level where the tax kicks in, the numbers rise sharply.At the €500,000 threshold 4.5 per cent of households have to pay. At the lowest €250,000 one it rises to more than one third. But the share of total national wealth rises less sharply – from 19 per cent to 32 per cent – as the amount of assets held per household falls sharply at lower levels. The family home is source of wealth for middle and higher earners. Photograph: Frank Miller/The Irish Times The third lesson reflects the importance of the family home as the source of wealth for middle and higher earners. The main residence is only a small portion of wealth at the very highest level – where households typically own businesses or have significant financial asset. For middle Ireland, the family home is the key asset. For a wealth tax covering everyone with assets over €250,000, exempting the family home would cut the annual tax take from €4.5 billion to €2.6 billion. Who pays? The profile of those who pay depends crucially on the rules set. The wealthiest top 10 per cent will always be hit hardest but a key political decision would be where to draw the line. Too high and you limit the revenue raised. Too low and it ends up as a family home tax on middle earners. The fact that there are wealthy people with relatively low incomes is another complication.Overall, an Irish wealth tax would mainly hit middle aged and older property owners – those aged 55 years of age plus would pay around two thirds of the tax under most scenarios. If the base of the tax is narrow – excluding the family home – then those aged 65 or more would be in the firing line, as those hold higher investments in savings and other financial assets. They would typically paying close to half or more of the total tax, depending on the rules. On the flip side, younger renters hold hardly any wealth and so would pay little tax.Would politicians hike the LPT? The bottom line The report underlines that a wealth tax could raise a significant sum in revenue, but only if it covered a broad base of wealth. This brings politically sensitive areas of business and farm wealth and the family home into the picture – all currently advantaged by the Irish tax system. An alternative, as recommended by the Commission on Tax and Welfare in 2023, is to increase exiting taxes on wealth rather that introducing a separate new wealth tax. But there is no easy decisions either here for Irish politicians – do they, for example, end the favourable inheritance rules for businesses and farms? Or hike the local property tax (LPT)? None of these things will happen for as long as there is a budget surplus. But with the Fiscal Council warning that more revenue will be needed in the years ahead to meet the costs of an ageing population and climate change, sooner or later Irish policymakers will have to consider where it comes from.Sinn Féin has called for a study on a wealth tax and recommended hikes on capital taxes and pensions. Labour’s alternative budget also calls for a hike in a range of capital taxes, including capital gains tax and the capital acquisitions tax. The Social Democrats wants to tax the “super-wealthy”, likely only to work as part of an international drive in this area.But more taxes on wealth are now creeping on to the Irish political agenda. The comfortable classes are in the firing line – even if they don’t realise it yet.