Wealth Tax & Entrepreneurship

Date

2022-08-25

Authors

Yeung, Solomon

Journal Title

Journal ISSN

Volume Title

Publisher

Abstract

In a time of increasingly growing income inequality and a shrinking middle class, many governments are proposing redistributing wealth using a personal wealth tax. The wealth inequality has further been exasperated by the COVID-19 pandemic resulting in loss of employment. Wealth inequality is far greater than income inequality as wealth accumulation operates in a self-reinforcing way and likely to increase in the absence of taxation. Investment returns tend to increase with wealth and high earners can save more due to their lower marginal propensity to consume. Governments globally have responded to the crisis through stimulus packages which resulted in an increased budget and government deficit to keep the country’s economy from falling into an economic collapse (i.e., a recession or stagflation). This has resulted in ballooning government deficits and a response from governments to find avenues to fund the increased budgets. The wealth tax is a tool that is proposed by politicians to raise tax revenues considering the growing deficit and expanding budgets. While the tax system should help address wealth inequality, the question is whether the wealth tax is the most effective way to do so. This study will examine the impact of a wealth tax adopted by countries and entrepreneurial activity in the country. Will a wealth tax be more beneficial or harmful to a country’s entrepreneurship size? The findings from the longitudinal study showed mixed results as to whether a wealth tax had a negative or positive impact on entrepreneurship. Four main indices which the study found had an interesting relationship with wealth tax were 1) Self-Employed with and without employees, 2) Self-Employed Manufacturing versus Services sector, 3) Self-Employed Youth rates for men versus women, and 4) Self-Employment rates for men versus women. The case event study has also shown that a wealth tax may not be all beneficial and resulted in France repealing their wealth tax.

Description

Keywords

Wealth Tax, Entrepreneurship

Citation