King's College London

Which factors have driven wealth taxation over the long run of history? We look at a new dataset on the first permanent introduction of taxes on net wealth, i.e. recurrent taxes levied based on the absolute value of an individual’s financial assets, to answer this question. First, we place the introduction of wealth taxation in the historical genesis of the modern tax state. We find that recurrent taxes on net wealth are a more recent, yet less widely spread phenomenon than other progressive taxes. Second, we analyse the historical drivers of wealth taxation. In particular, we argue that the net wealth tax was mainly used as an ‘emergency tax’ when countries faced major shocks. Utilising event history analyses, we compare the impact of two major types of shocks: wars and recessions. Our results show that wealth taxes were primarily introduced in the aftermath of major economic recessions, whilst wars do not speed up the uptake of wealth taxes. In contrast to other modern tax introductions, we do not find that countries are generally more likely to introduce wealth taxes as a result of broader societal change such as modernisation or democratisation.