Europe tried wealth taxes. Most gave up.

By Brett Rowland
The Center Square

Democratic senators are advancing a series of proposals to tax America’s wealthiest households, with supporters projecting trillions in new federal revenue. Critics, however, argue the plans would generate far less than promised while creating economic and legal complications.

Democrats have introduced four major proposals this year aimed at millionaires and billionaires. Phillip Magness, a senior fellow at the California-based Independent Institute, said similar policies in Europe often produced lower-than-expected revenues and, in some cases, encouraged wealthy residents to relocate.

U.S. Sen. Bernie Sanders, I-Vt., and Rep. Ro Khanna, D-Calif., introduced the Make Billionaires Pay Their Fair Share Act in March. The proposal would impose a 5% annual wealth tax on the roughly 938 Americans with a net worth exceeding $1 billion.

U.S. Sen. Elizabeth Warren, D-Mass., introduced the Ultra-Millionaire Tax Act, which would impose a 2% annual tax on household wealth above $50 million and a 3% tax on wealth above $1 billion.

“While multi-millionaires and billionaires are getting richer and richer, families are getting squeezed by a rigged economy,” Warren said. “My bill is about basic fairness and making the ultra-wealthy pay their fair share.”

Meanwhile, U.S. Sens. Ron Wyden, D-Ore., and Chris Van Hollen, D-Md., have introduced separate proposals targeting unrealized capital gains and dynastic wealth.

Economists Emmanuel Saez and Gabriel Zucman estimate the Sanders proposal would raise $4.4 trillion over a decade. Competing estimates from the Tax Foundation and the American Enterprise Institute project significantly lower totals of $3.3 trillion and $2.3 trillion, respectively.

Saez and Zucman’s estimate for Warren’s proposal has more than doubled since the legislation was first introduced in 2021, which the economists attribute largely to the rapid growth in billionaire wealth during that period.

Zucman has estimated that U.S. billionaires pay an effective tax rate of about 23%, though Magness disputed that figure, arguing broader accounting methods place the rate closer to 40%. A 2025 paper by IRS economist David Splinter estimated effective tax rates as high as 45% for top earners.

Wealth taxes have largely disappeared across Europe. Twelve European countries imposed wealth taxes in the 1990s, but only Spain, Norway and Switzerland still maintain them today.

“In practice, these measures have almost never delivered on their promised tax revenue,” Magness told The Center Square.

According to Magness, countries including Austria, France, Sweden, Finland and Denmark repealed their wealth taxes between 1994 and 2018 because of low revenue yields and concerns that high-net-worth residents would move assets or relocate abroad.

Spain’s wealth tax, one of the few still in place, generates revenue equal to roughly 0.2% of the country’s gross domestic product.

The debate comes as the federal government projects a roughly $2 trillion deficit for fiscal year 2026, up from $1.8 trillion the previous year.

Even under the most optimistic projections, wealth taxes would offset only a portion of the deficit. The Tax Foundation has also estimated that the largest proposed wealth tax could lose more than two-thirds of its projected revenue impact over 30 years because of tax avoidance and slower economic growth.

Magness said the proposals would likely face significant constitutional challenges. Some legal scholars argue the 16th Amendment authorizes federal taxation of income but does not permit direct taxation of unrealized gains or accumulated wealth without apportionment among the states.

Other scholars contend a wealth tax could be structured to comply with constitutional requirements. The issue has never been definitively resolved by the U.S. Supreme Court.