Policy

The long, failed history of wealth taxes

September 26, 2026 · 5 min read

The co-authors of Prop 40 claim a wealth tax would be the solution to all of California’s problems. But the history of wealth taxes shows otherwise. Californians deserve to know how this risky experiment trades the state’s future economy, jobs, and tax base, for debunked European economic theory.

In 9 of the 12 countries where wealth taxes have been introduced, they’ve failed. The co-authors of Prop 40 should know this history well, given that their home country of France had to repeal its own wealth tax due to it’s failure to raise revenue, capital flight, and economic consequences.

And as Stanford Professors Josh Rauh and Benjamin Jaros noted in a recent piece in The New York Times: “All of the things that happened in France would happen in California, and the consequences would probably be worse.”

Wealth taxes have been tried around the world. They’ve failed:
“In 1990, 12 industrialized countries levied a wealth tax. By 2025, nine had repealed theirs—including Denmark, Sweden, Germany, the Netherlands and France. These nations discovered that wealth taxes are hard to carry out, cause wealthy people to move and take their money elsewhere, and raise far less tax revenue than promised.”

The authors of the tax plan must know this history well: France, their home country, abolished its wealth tax in 2018 after an estimated 200 billion euros (about $228 billion) left the country over two decades and, according to estimates, the tax generated an annual budget shortfall of seven billion euros.”—Stanford Professors Rauh and Jaros in The New York Times
The few places that have kept wealth taxes have not fared well:
According to academic researchers from the Andersen Institute, Columbia and UC Berkeley, other countries’ experiences enacting similar taxes, “often leads them to abandon or modify the taxes in light of that adverse experience.” The report authors point out that in all other examples looked at, the rates of taxation were well below the 5% proposed by Prop 40’s authors.—Andersen Institute, Columbia, and UC Berkeley research.
And the economic impacts persist:
According to MIT economists who have studied wealth taxes, capital flight and avoidance remain a problem in countries that have maintained their wealth tax.
These taxes don’t produce the revenue promised:
“Decisions to repeal net wealth taxes have often been justified by efficiency and administrative concerns and by the observation that net wealth taxes have frequently failed to meet their redistributive goals. The revenues collected from net wealth taxes have also, with a few exceptions, been very low.”—Report from the Organization for Economic Cooperation and Development
An old idea, same bad results:
“Taxing wealth is hardly a new idea. Such policies have been well tested, and their track record has been disappointing. Among other things, the revenue typically falls short of projections; behavioral responses inevitably erode the tax base; economic costs usually extend beyond the wealthy; and persistent legal challenges add another layer of uncertainty. Wealth inequality may very well be a problem worth addressing, but wealth taxes are not the solution.” —Tax Foundation Europe Economist Cristina Enache
California’s dependence on high-earners, puts it even more at risk:
MIT professors note that California already “has a highly progressive tax system that relies on a small number of high-income earners, which increases revenue volatility and exposes California to the risk that they will flee the state. A recent Governor’s Budget Summary highlights that the share of total resident personal income tax liability of the top 1% of income earners in the state has exceeded 40% in 17 of the past 20 years.”
California should not repeat Europe's mistakes:
Stockholm’s Research Institute of Industrial Economics Professor of Economics and Senior Research Fellow Magnus Henrekson: “California does not need to repeat Sweden’s mistake to learn from it. The state’s prosperity has been built by people who turn ideas into companies. Tax policy should ask successful citizens to contribute, but it should not teach future founders that the reward for building in California is to become a fiscal target. Sweden’s message to Californians voting in November is simple: A wealth tax may begin as a symbol of fairness, but it can end as a tax on the very dynamism that makes prosperity and generous public services possible.” (SF Standard, “Sweden’s warning to California: Don’t tax wealth like we did,” July 23, 2026)

Other countries have made the same mistake Californians are being tempted to commit. In 1990, 12 industrialized countries levied a wealth tax. By 2025, nine had repealed theirs—including Denmark, Sweden, Germany, the Netherlands, and France. These nations discovered that wealth taxes are hard to carry out, cause wealthy people to move and take their money elsewhere and raise far less tax revenue than promised.”

— Stanford Professors Rauh and Jaros, The New York Times · May 2026(May 2026)

What has been the experience with wealth taxes? The short answer is: not good. Colombia, Norway, Spain, and Switzerland currently have wealth taxes, but a considerably larger number of countries including Austria, Denmark, Finland, France, Iceland, India, Luxembourg, Sweden, and the Netherlands have implemented and subsequently repealed them. The reasons given for repeal include capital flight, adverse effects on entrepreneurship and innovation, administrative costs, legal problems, and disappointing revenue. Capital flight and avoidance remains an issue for the countries that have maintained their wealth tax.”

— MIT Professors Ray Ball and Andrew Sutherland · Sep 2026(Sep 2026)