Capital levy

From Wikipedia, the free encyclopedia
Jump to: navigation, search
The Conscientious Burglar.
Paisley humanitarian. "If I could only be quite sure that I shouldn't be discouraging him from saving."

"Mr. Asquith has pronounced himself cautiously in favour of a capital levy, on the condition, amongst others, that it must not be allowed to discourage the habit of saving." Cartoon from Punch magazine, February 11, 1920, illustrating part of the dilemma for governments pondering the use of a capital levy.

A capital levy is a tax on capital rather than income, and is collected once rather than annually. For example, a capital levy of 30% will see an individual or business with a net worth of $100,000 pay $30,000 in tax, regardless of income. It is considered difficult for a government to implement, as the confiscatory nature of taxation is more apparent than with income tax. Thus once such a levy is enacted, capital flight is likely to ensue.

Some economists argue that capital levies are a disincentive to savings and investment, though others argue that in theory this need not be the case. The latter view has gained some acceptance as more and more heavily indebted nations struggle to raise revenues; in October of 2013, the International Monetary Fund released a report stating that “The sharp deterioration of the public finances in many countries has revived interest in a ‘capital levy’ – a one-off tax on private wealth – as an exceptional measure to restore debt sustainability. The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be repeated, does not distort behavior..."[1][2]

A February 2014 report by Reuters showed the idea had gained traction in the European Commission, which will ask its insurance watchdog later that year for advice on a possible draft law "to mobilize more personal pension savings for long-term financing".[3]

References[edit]

The Capital Levy in Theory and Practice

  1. ^ Opdyke, Jeff. "A Confiscation Tax is Headed Your Way". The Sovereign Investor. The Sovereign Investor. Retrieved 27 December 2013. 
  2. ^ IMF Fiscal Monitor: "Taxing Times" Oct 2013, p.49
  3. ^ reuters.com: "Exclusive: EU executive sees personal savings used to plug long-term financing gap" (Jones) 12 Feb 2014