The growing chorus for a green wealth tax in Europe

Macron's MoDem group and a European citizens' initiative

In September, Jean-Paul Mattei of the MoDem group, part of President Emmanuel Macron's ruling majority, publicly supported the idea of a wealth tax to fund the ecological transition. Meanwhile, Social Democrat MEPs Aurore Lalucq and Paul Magnette have taken a significant step by submitting a request to the European Commission for a "European citizens' initiative" on the subject.

According to Martin Baloge in The Conversation, this initiative could pave the way for a European directive introducing an "ecological and social wealth tax" targeting the wealthiest 1% of households, provided it gathers a million signatures in at least seven countries within a year. The commission in July gave its approval for signature collection, marking a crucial development.

A glimpse into potential impacts

A study commissioned by the Green Group in the European Parliament and conducted by the NGO Tax Justice Network delves into the potential effects of such a wealth tax. The study indicates that a European tax on the richest 0.5% of households could yield a substantial 213 billion euros annually, a figure not to be taken lightly. As per Baloge’s report, this is particularly noteworthy considering the near-extinction of wealth taxes in European Union member states. As of 2023, only Spain retains a wealth tax, with varying rates and a threshold of 700,000 euros, applied differently across autonomous communities.

National perspectives on wealth tax

While the reinstatement of wealth taxes at the national level in France and Germany appears unlikely, the dynamics are quite distinct when it comes to European-level discussions, especially in the context of climate-related concerns, as reported in The Conversation.

Macron's controversial move

French President Emmanuel Macron's early policy actions included the abolition of the "impôt de solidarité sur la fortune (ISF)," a wealth tax enacted in 1981 during François Mitterand's government. It was replaced with the property wealth tax known as the IFI. Despite this change, the shift considerably reduced tax revenues, with the ISF contributing 4 billion euros to public coffers in 2017 and the IFI only generating 2.35 billion euros in 2022.  According to expert Baloge’s report, the impact of this tax change on curbing tax exile rates and enhancing the country's competitiveness remains uncertain.

Germany's dormant wealth tax

In Germany, wealth tax remains part of the country's Basic Law but hasn't been enforced since June 22, 1995, when the Federal Constitutional Court ruled that it violated the principle of tax equality. The debate on the return of capital taxation frequently surfaces in both France and Germany, often referred to as the "engines of Europe", as reported in The Conversation.