Wealth tax: a century-old fantasy and economic absurdity

The proposed wealth tax (ISF) will be applied to the assets of each Belgian family whose total exceeds 1 million euros, including the value of their home, with a progressive rate reaching up to 3%. This tax will be added to existing taxes, such as capital taxes and their income, making Belgium, after Denmark, the highest taxed country in Europe. Preliminary estimates suggest that such measures could generate around 4 billion euros, which would help reduce the budget deficit to 3% of GDP or according to European standards, while also promoting increased public spending for decarbonization and the creation of new material resources. This move will be perceived by the majority of the population (about 90%) as an opportunity to establish social justice, as they will believe that wealthier citizens should pay higher taxes.

However, there are already many capital taxes in the country: these include transfer taxes, property registration fees, inheritance tax, as well as a securities tax that the minister planned to increase several times. There is also an inflation tax on fixed incomes, such as deposits and bonds. While the capital gains tax rate is 30%, the income generated from 3% interest is also taxed as income, which effectively turns it into a repayment of the principal, meaning that the overall effect can lead to a negative real income due to inflation.

We emphasize that business owners and shareholders actively pay taxes: the corporate tax rate is 25%, and the dividend tax is 30%. Additionally, there are various fees and charges for storage services, which ultimately lead to a reduction in their net income. This raises the question: how can such tax rates be considered fair for those who are self-employed or hired workers?

Is the concept of a "millionaire tax" being implemented in Belgium? Possibly, but it would require the creation of a large-scale tax structure. Such practices exist in Europe, but in the USA, Japan, and most European countries, similar taxes are only relevant in Switzerland at a minimal level (0.25%), while in Spain they are temporary (until the end of 2024) and depend on the region. In France, there was no discussion about a wealth tax when it was abolished, as this led to the fiscal system losing traditional taxpayers. Norway still maintains a similar tax at a rate of 0.85%, but their qualifying indicators show that more funds are leaving the country than coming in.

Economists often stretch the facts, selecting ideal conditions for economic growth without considering the negative consequences of increased unemployment and overall social instability, as evidenced by data collected from Sweden and Denmark regarding the effects of abolishing such a tax.

In addition to the costs of administering such a system, in order to collect the necessary amount, it is essential to identify and assess taxpayers' assets, appoint appraisers to evaluate works of art, antiques, and other valuables. The wealth tax may also affect those who have not engaged in excessive accumulation, such as tenants of expensive apartments. As a result, lawyers, financial consultants, and tax specialists will earn well, but this does not add real value.

The plan to introduce a new tax seems unfeasible, as citizens are not the kind of people who will tolerate such control. Moreover, many may recall how Belgium historically lost part of its tax potential due to a long-standing unfavorable climate for business and investments, particularly because of the constant exodus of wealthy retirees to other European countries. As for stocks, high taxes will only deter investors, and many who wish to invest may feel disappointed and unwilling to risk their capital.

One of the significant consequences of the introduction of the new tax will be not only the migration of capital but also the desire of large investors to buy back their shares, which will already lead to a reduction in the volume of investments and new jobs. Due to the uncertainty in the economic future, no one will want to work with Belgian startups.

The problems with implementing such a scheme are doomed to failure from the start. This will be evident beyond the country's borders as well. If there is an attempt to implement a similar program in a decentralized power structure, Belgian working citizens will be forced to postpone their efforts to achieve justice and plan their actions.

Such a tax policy is likely to turn into a one-sided game, causing the wealthier part of society to detach from state control. Issues related to tax distribution may also lead to a general extrapolation, where the tax burden is concentrated on a specific group of citizens. There is a significant risk that high taxes on the rich will make Belgium less attractive for investments, which in the long run will only increase the economic pressure on the country.

In summary, it is important to note that alternatives to imposing additional taxes may well exist, such as reducing government spending, taxing certain items at the international level, or more efficient use of budgetary resources. However, real changes in the long term will depend on the government's ability to recalibrate economic mechanisms and create a system that supports growth without excessive tax burdens.