When the UK Business Secretary Jonathan Reynolds recently dismissed wealth taxes as “daft” and “populist,” he echoed a long-standing orthodoxy among British policymakers: that taxing capital is either unworkable or economically self-defeating. It is a politically convenient view—but one that risks intellectual complacency at a time of mounting fiscal pressures.
Reynolds is right that there is no perfect model of wealth taxation operating anywhere in the world. The historical record is, at best, mixed. France’s impôt sur la fortune drove capital abroad. Other experiments—Germany’s now-defunct net wealth tax, or Spain’s problematic implementation—exposed persistent flaws: valuation difficulties, evasion risks, and administrative burdens. These are not trivial concerns.
Yet the assertion that no functioning wealth tax exists does not absolve governments from asking a more difficult question: what role should accumulated capital play in funding modern states when income and consumption are no longer enough? Rejecting wealth taxation outright avoids rather than resolves this debate.
The UK’s tax base is heavily reliant on labour income, consumption, and housing. Meanwhile, financial and business wealth—often under-taxed or shielded by reliefs—continues to accumulate at the top. The result is a system that strains under ageing demographics and long-term spending commitments, while telling voters there is no alternative to higher income tax or austerity.
The argument that taxing wealth is “impractical” also rings hollow when set against the complexity already accepted in corporate taxation, financial regulation, or international compliance regimes. What truly distinguishes wealth tax from other policy challenges is not technical difficulty but political aversion.
This is not to say that a traditional wealth tax is the answer. Many of its design flaws remain unresolved. But nor is the status quo sustainable. If not a direct wealth tax, then governments will almost certainly turn to indirect asset-based mechanisms: tighter inheritance regimes, expanded property taxes, reform of pension tax reliefs, or levies on unrealised gains. Several of these are already under discussion in OECD circles.
The risk is not that we debate wealth taxation too much, but that we do so too late, in response to a fiscal crisis rather than as part of a credible, long-term tax strategy. The result may well be rushed, distortionary and politically corrosive—ironically, all the things critics claim wealth taxes already are.
There is nothing populist about asking those with the greatest stock of resources to contribute more—especially when those resources have grown faster than wages or GDP. What is impractical is assuming that capital can remain outside the scope of reform while the rest of the tax base continues to bear the full weight of national expenditure.
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