The idea of taxing personal fortunes is getting more attention as the gap between the rich and everyone else grows wider.
It’s not just a feeling—the divide is real. Research from ACOSS and UNSW Sydney shows that the wealth of Australia’s top 10% is growing much faster than that of the bottom 60%. Today, nearly half of all wealth is concentrated in the hands of the top 10%. As the rich keep getting richer and the rest struggle to keep up, many are asking: do we need to take action to rebalance the economy?
Balancing the economy
For years, discussions of inequality have focused on income. But now, people are starting to pay more attention to wealth, which plays a huge role in shaping opportunities. As wealth becomes more concentrated, it’s becoming a clear signal of inequality.
Wealth inequality in itself isn’t always a problem. But when it becomes extreme, it limits opportunities for most people, while those at the top enjoy growing power and privilege. This can hurt social unity, and it makes it harder for people at the bottom to fulfill their potential. That’s why many believe it makes sense to redirect some of the wealth at the top to help those who are struggling.
A wealth tax aims to do just that. By taxing a small share of the wealth held by the richest people, governments could raise money to help reduce inequality. This money could be used to improve services like education, build more affordable housing, or increase support for low-income families.
Wealth tax
One option is a yearly net worth tax—a tax on a person’s total wealth (their assets minus their debts). Unlike income tax, which is based on earnings, this tax captures a fuller picture of someone’s financial power. A variation of this, often called a “billionaire tax,” would target only the wealthiest. Some countries, including Brazil and Germany, have already shown interest in a 2% global minimum tax on billionaires.
Supporters argue that the wealthiest have the means to pay more and should contribute fairly. Opponents say that it punishes success and could drive the rich to move their investments to lower-tax countries.
However, putting a wealth tax in place isn’t easy. Many countries that once had wealth taxes have dropped them due to problems with valuing assets, enforcing the rules, and dealing with wealthy people’s ability to move their money. Cryptocurrencies can be hidden, real estate needs regular appraisals, and shares in private companies often lack clear market values. Also, some people own valuable assets but don’t have enough liquid cash to pay the tax.
These problems can be solved, but they require clever solutions. For instance, insurance companies could report the assets they insure and their value. Even if a wealth tax doesn’t raise much revenue, it could still send a message that the wealthy need to contribute more.
Right now, billionaires around the world pay an average tax rate of just 0.3% on their wealth. In countries like Spain, which still have wealth taxes, the revenue raised is far below what it could be due to tax evasion.
Alternative options
If wealth taxes are too hard to implement, there are alternatives. An inheritance tax—charged when a person dies—would avoid many of the issues that come with a net worth tax. Inheritance taxes are harder to dodge since the assets are sold or disclosed after death, and liquidity problems disappear when the assets are divided.
Another option could be to reform property taxes. In Australia, where a lot of personal wealth is tied up in real estate, replacing one-time stamp duties with annual land taxes would raise more revenue over time. Stamp duties, charged when property is sold, discourage people from moving and are less efficient than yearly property taxes.
As the problem of inequality worsens, ideas that once seemed out of reach may become more appealing—and even necessary. If governments push through reforms, the hope is that they’ll create a tax system that is not only fairer but also more effective for everyone.
