A one percentage point increase in wealth taxes – a very large increase indeed – reduces growth by just 0.02 to 0.04 percentage points. Not insignificant, but certainly not the picture of economic doom painted by critics.
Our star editor at the new Unherd appears confused here.
A 1% of GDP increase in wealth taxes would indeed be large. But that’s not what this paper, which she refers to, says. Rather, a 1% increase in the revenue from a wealth tax reduces GDP growth by 0.02 to 0.04%.
The countries studied have wealth tax revenues as % ge of GDP of 0.1% to 1%. Call it, say. 0.3% as an average. We increase the revenue from that by 1%, to 0.31% of GDP. Future GDP is lower by 0.03% of GDP. Marginal tax take is higher than average, of course. So a reasonable guess is that tax revenue would have been 50% of that marginal 0.03% of growth we’re not having. Which is higher than the 0.01% of extra tax we did get.
We’re over the peak of the Laffer Curve already…..