Want a good way to tax wealth and capital income?

Wealth taxes and estate taxes are taxes on the virtue of saving. And nobody has found a good way to implement such a tax. Ten European countries, including France, Germany, and Sweden have repealed wealth taxes. India also repealed its wealth tax, first enacted in 1957, in 2015.

Chris Edwards, in a recent study for the Cato Institute, contends a consumption-based tax is “a simpler way” to tax capital income “that does not stifle investment and economic growth.”  Roy Cordato and John Hood have often made the case for a consumed-income tax in North Carolina. Edwards also points to the Hall-Rabushka flat tax and David Bradford’s X-Tax as other approaches to accomplish the same goal.

Bill Gates provided an example Edwards borrows: “Think about the three wealthy people I described earlier: One investing in companies, one in philanthropy, and one in a lavish lifestyle. There’s nothing wrong with the last guy, but I think he should pay more taxes than the others.” Current income, wealth, and capital gains taxes do not accomplish this. A consumption-based tax would and would also leave room for economic growth.

Joseph Coletti / Senior Fellow

Joe Coletti is a senior fellow at the John Locke Foundation focused on fiscal policy issues. He previously headed the North Carolina Government Efficiency and Reform initiativ...

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