Wealth taxes hit growth companies harder than capital gains taxes, Swedish data shows
A new analysis of Sweden's wealthiest households reveals that taxing accumulated assets directly damages startup funding and business growth more than taxing investment returns does. The finding complicates efforts to address inequality among the rich without harming entrepreneurship and job creation.
Originaltitel: Taxing the wealthy: the choice between wealth and capital income taxation
<p>This paper analyses the relative merits of wealth and capital income taxes as instruments for taxing the rich. The main rationale for a wealth tax is to address the incompleteness of the tax code in taxing unrealized capital gains, which can be enormous and concentrated among the wealthy. However, by taxing presumed rather than actual returns, a wealth tax fails to address inequality among taxpayers with the same wealth but different capital incomes. In addition, wealth taxation creates liquidity problems that may adversely affect growth firms and start-ups, which is why wealth taxes typically provide exemptions and deductions for certain business assets. Our empirical analysis, based on Swedish register data, describes the wealth composition of the wealthiest and assesses the distributional incidence of different combinations of wealth and capital income taxation.</p>