4.7 Article

A one-off wealth tax for Belgium: Revenue potential, distributional impact, and environmental effects

Journal

ECOLOGICAL ECONOMICS
Volume 196, Issue -, Pages -

Publisher

ELSEVIER
DOI: 10.1016/j.ecolecon.2022.107385

Keywords

Wealth tax; Wealth distribution; Belgium; Environmental effect; Revenue potential; Distributional impact

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This study estimates Belgium's wealth distribution and evaluates the revenue potential, distributional impact, and environmental effect of a one-off wealth tax. The findings indicate that the wealthiest 1% of households possess a significant amount of wealth, and the revenue potential of a one-off tax is higher than expected. However, the reduction in wealth inequality and environmental impact would be minimal.
Policymakers and economists are becoming increasingly concerned about wealth inequality. Here we estimate Belgium's wealth distribution - and based on this distribution - the revenue potential, distributional impact, and environmental effect of three proposals for a one-off Belgian wealth tax. Our method consists of (1) esti-mating the Belgian wealth distribution by extending survey data with a top-tail Pareto distribution based on a novel national rich list, and (2) combining the estimated wealth distribution with proposed tax configurations and published elasticities. There are four main results. First, the wealthiest 1% of households possess similar to 24% of total net wealth, substantially more than previous estimates suggest. Second, the revenue potential of a one-off tax is considerably higher than estimated by wealth tax advocates. Third, the distributional impact would be limited as the richest 1% of households would still possess at least 23% of total net wealth. Fourth, a one-off tax would likely reduce CO2 emissions by only 0.1-0.6%. Overall, our findings suggest a one-off wealth tax could finance over half of Belgium's COVID-19 costs, but would lead to only small reductions in wealth inequality and environmental impact. Ecological economists may therefore wish to pursue other policy proposals to achieve fair distribution and sustainable scale.

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