Ode To Greedy Taxes
- R. S. Koçyiğit
- Mar 16
- 13 min read
It has been quite a while since I picked up my keyboard for magellanique.com. Unfortunately, work and studies are quite challenging, thus the circumstances made it quite impossible for me to focus on this website.
Recently, a good friend of mine asked me about potential arguments regarding the "greedy taxes". By “greedy taxes,” I mean taxes designed to take an unusually large share of private property, often through high rates, repeated layers of taxation, and complex rules that expand the tax bite over time. I use the term because these taxes can go beyond simple revenue collection and start to penalize saving, investment, and long term planning, while creating strong incentives for avoidance and costly enforcement.
While preparing potential arguments for him, I noticed that I pretty much wrote an literature review-esque article. So, I said to myself that I might as well put it to my website by adding an introduction and conclusion. And it seems like that's what I did, so let's begin:
Many policy proposals focus on higher taxes on wealth, inheritances, and capital gains. Supporters say they reduce inequality and raise revenue with small side effects. This article disputes that claim and says the promised gains often do not appear. It argues these taxes are hard to measure, costly to enforce, and damaging to saving and investment. The article is split into four parts. Part 1 sets out practical problems like valuation, loopholes, and compliance costs. Part 2 reviews economic effects like lock in and weaker capital formation. Part 3 examines ethical issues. And lastly, Part 4 reviews real world cases.
1) PRACTICAL ARGUMENTS
Inheritance Tax
Compliance costs is more or less equal to revenue: Democratic economists Aaron & Munnell found compliance/administrative costs roughly equal tax yield (~$22B costs for ~$22B revenue)[1]
May generate negative net revenue: Senate report argues estate tax reduces income tax revenue by MORE than it collects; Bernheim (Stanford) calculated "true estate tax revenues may well have been negative"[1]
Ireland example: Administrative + compliance costs = 20-50% of revenue[2]
Capital Gains Tax
Lock-in effect: Feldstein & Slemrod (NBER) proved investors delay selling to defer taxes, trapping capital in suboptimal assets. It essentially forces investors to hold onto bad assets thus misallocate the resources, causing malinvestments.[3]
Nominal taxation problem: In 1973 alone, Americans paid $500M extra tax on purely nominal (inflationary) "gains", i.e. essentially zero gain in real terms was taxed.[3]
Wealth Tax
Valuation impossible: Valuation of assets are totally subjective, as dictated by the marginal value theory. Thus, it is impossible to evaluate an asset's true worth. Austria repealed wealth tax in 1993 due to enforcement costs.[4]
Fraud endemic: French ISF had ~28% fraud rate due to under-assessment of property.[5]
OECD average revenue: Only 0.2-0.4% of GDP, doesn't worth collecting, you just make people become dishonest and make them try to escape your jurisdiction.[2]
2) ECONOMIC ARGUMENTS
Theory: How Capital Creates Wealth
Böhm-Bawerk's roundabout production: Capital (tools, machinery) multiplies labor productivity; workers with capital produce more than workers without[6]
Capital accumulation → More loanable funds in future → Lower natural rate of interest → Higher natural growth rate → Increased wealth
Time preference: Capitalists defer consumption; workers get paid NOW before products sell; profit = compensation for waiting, not exploitation[6]
Subjective value theory (Menger, 1871): Value flows FROM consumers TO inputs. refutes previously accepted labor theory of value.[7]
Solow model: Capital stock leads to output and productivity gains. General assumption is: 1% increase in capital stock → ~0.36% output increase
Inheritance Tax
Poterba (MIT): Estate tax raises effective capital tax burden by 1.3-1.9 percentage points[1]
Joint Economic Committee of the Congress: Estate tax reduced US capital stock by ~$497 billion (3.2%). Thus, according to the Solow model, damages productivity and growth (both theoretically, and empirically).[1]
Even Stiglitz admitted: High inheritance taxes just force consumption during lifetime instead of saving. [1] Basically by proposing a wealth tax you make the productive person:
spend everything they have before they die
flee the jurisdiction
not work at all as they cannot leave anything to their heirs
Inheritance decreases income and wealth inequality: Stiglitz, yes that STIGLITZ, also argued that inheritances actually decrease inequality. He argues it is because inheritances redistribute income within families. In yet another analysis, Stiglitz concluded that “it would seem clear that inheritances are unambiguously equality increasing” in terms of consumption, and an argument can be made that inheritances reduce inequality of income and wealth as well. The conclusions reached by Blinder and Stiglitz have been replicated by numerous other researchers. [1]
Capital Gains Tax
Chamley-Judd theorem: Optimal long-run capital income tax rate = ZERO[8]
Keuschnigg & Nielsen (2003-04): Even small CGT discourages entrepreneurial effort with first-order welfare loss[8]
Poterba (NBER): Capital gains taxes have "dramatic effect" on entrepreneurship decisions[8]
Double taxation on stocks: Corporation pays 21% first → shareholder pays CGT → combined effective rate ~39.8%[9]
Misallocation of resources and Taxing of Nominal Gains: As just said in "1) Practical Arguments" part; you just force investors to keep their money in malinvestments as exiting would make them pay more money, which in the most cases barely grew in real terms. Hence, in the BEST case scenario, you are literally taxing an asset's original real value, instead of the surplus value created by it as originally proposed by the tax. It is literally the most pointless and dishonest tax ever.
Wealth Tax
Pichet (2008): French ISF caused annual fiscal shortfall of €7 billion — twice what it yielded.[5]
GDP impact: ISF reduced French GDP growth by ~0.2% annually — roughly equal to tax yield.[5]
UK modeling: Wealth taxes would reduce long-run GDP by 4-5%.[2]
Worst taxes ever: Are the ones that actually hinder capital accumulation; i.e. corporate taxes, wealth taxes, and estate (inheritance) taxes. According to the Tax Foundation and Senate JEC Report.[45]
If the rates are:
Progressive → It will be rather better for the rather "petite bourgeoise", however, all sorts of progressive taxes reduce growth rate, and level of income per capita.[46]
Flat → Big problems for for the upper-middle class, as they do not have a strong cash flow to pay-off these, forcing them to sell-off their properties to the richest percentile.
3) ETHICAL ARGUMENTS
Double Taxation
Friedman Open Letter (700+ economists incl. Nobel laureates Fama, Prescott, Vernon Smith): "The income used to accumulate assets was taxed when received; earnings taxed year after year; estate tax is a second or third layer on the same assets".[10]
Tax Foundation: Key distinction: transactions generating NEW income (taxable) vs. transfers of EXISTING after-tax wealth (shouldn't be taxed).[11]
Punishes Virtue, Rewards Consumption
Friedman: "The estate tax taxes virtue — living frugally and accumulating wealth. It discourages saving and encourages wasteful spending"[10]
McCaffery (USC, self-described liberal): Calls it a "virtue tax": "a tax on thrift, on long-term savings"[10]
The message sent by the estate tax: Friedman argues that estate tax simply says this to the taxpayer: "Spend on riotous living — no tax. Leave to children — the tax collector gets paid first"[10]
Property Rights Include Bequest
Nozick (Anarchy, State, Utopia): Legitimate property includes right to bequeath — justice in acquisition, justice in transfer
Fact check on "dynasties": 81% of millionaires are first-generation rich; only 14% cite inheritance as primary wealth source.[10]
Shifts Burden to Remaining Taxpayers
Pichet (2009): "In an open world, wealth tax impoverishes France, shifting tax burden from departing wealthy onto other taxpayers"[5]
The irony: Middle-class and poor ultimately pay for the rich leaving.
4) Real-World Cases
Norway (2022-Present) // Wealth Tax
What happened: Left-wing government raised wealth tax to 1.1% (from 0.85%) + capital gains/dividend tax to 37.8%
Results:
300+ billionaires/multimillionaires left by 2024[12]
NOK 600 billion+ in assets fled (≈$54 billion)[13]
More super-rich left in 2022 than previous 13 years combined[14]
Expected €146M extra revenue → actual net loss of €448M+[13]
Kjell Inge Røkke (Norway's richest, $5.1B) moved to Switzerland → cost government 175M NOK/year (~€15M)[15]
Socialist Left Party: Created "Wall of Shame" for departed entrepreneurs.[15]
France (1982-2017) // ISF Wealth Tax
What happened: Solidarity tax on wealth (ISF) — 1.5-1.8% on fortunes >€1.3M
Results:
€200 billion in capital flight since 1988[5]
10,000+ wealthy people left — mostly to Belgium[16]
Annual fiscal shortfall: €7 billion — twice what ISF yielded[5]
843 people left in 2006 alone → net loss €2.8 billion[17]
60,000 millionaires net outflow since 2000[18]
**Gerard Depardieu, Bernard Arnault publicly fled[16]
Macron's response: Abolished ISF in 2017, replaced with real-estate-only tax (IFI). Revenue dropped from €4B to €2.35B but capital flight stopped.[20]
Sweden (1911-2007) // Wealth + Inheritance Tax
What happened: Progressive wealth tax up to 1.5%, inheritance tax, income tax up to 85%
Results:
Resolution:
United Kingdom (2024-Present) // Abolished Non-Domicile Status
What happened: Labour government abolished 200-year-old "non-dom" tax status (April 2025), imposed inheritance tax on worldwide assets, raised capital gains tax (10%→18% basic, 20%→24% higher), increased National Insurance to 15%
Results:
10,800 millionaires left in 2024 — 157% increase from 2023[28]
One millionaire left every 45 minutes during 2024[28]
78 centi-millionaires (£100M+) and 12 billionaires departed[28]
Only China lost more wealthy residents in 2024[29]
London dropped from 5th to 6th among cities attracting millionaires — one of only two cities (with Moscow) showing net loss over decade[30]
UBS projects 500,000 millionaires will leave UK by 2028[30]
Adam Smith Institute: Non-dom reforms will shrink economy by £1.3 billion/year for next decade, eliminate 23,000 jobs by 2030[28]
Oxford Economics: Reforms will cost exchequer £1 billion annually from departing non-doms[31]
California (2020-Present) // High-Tax-State Exodus
What happened: California has highest state income tax in US (13.3% top rate), plus proposed "Billionaire Tax" (5% wealth tax) for 2026 ballot
Population Flight:
1.2 million more Americans left California than moved there (April 2020-July 2023)[33]
690,502 residents left in 2023 alone; largest of any state[34]
40% of Californians considering leaving (2023 Strategies 360 poll)[33]
California lost a House seat for first time in history (2020 census); projected to lose 4 more seats after 2030[35]
Tax Revenue Hemorrhage:
$102 billion in income left California (2020-2022) due to taxpayer migration[36]
$24 billion net income loss in 2022 alone; largest of any state[35]
Net outflow of 27,300+ tax returns with AGI >$200,000 (2020-2021)[37]
$5.6 billion in taxable income lost to Texas alone during pandemic[38]
State went from $97 billion SURPLUS (2021-22) to $50-70 billion DEFICIT (2025-26)[39]
Corporate Flight:
441+ businesses left California since 2018[40]
Tesla, SpaceX, X, Neuralink, Boring Company — all 5 Musk companies relocated HQ to Texas[33]
Oracle, Charles Schwab, Hewlett Packard Enterprise, Chevron, CBRE Group, Pabst Brewing → Texas[33]
In-N-Out Burger → Tennessee (2025)[39]
John Paul Mitchell Systems, Realtor.com → Texas (2025)[39]
Destination States (no state income tax):
"For every 60 people making $200,000+ who move OUT of high-tax states, only 40 move IN. The ratio is reversed for low-tax states." — Heritage Foundation (Footnote: [33])
Germany (Suspended 1997) // Wealth Tax
What happened: Constitutional Court ruled wealth tax violated equality principle (property valued at 1964 rates vs. financial assets at market value)
Result: Government chose not to fix it → tax automatically suspended. Never reinstated despite left-wing proposals at every election.[20]
Austria (Repealed 1993) // Wealth Tax
What happened: Wealth tax repealed due to enforcement costs
Result: "High cost of enforcement induced Austria to repeal"[4]
SUMMARY TABLE
Country/State | Tax Type | Result | Key Stat |
Norway | Wealth tax (1.1%) | 300+ millionaires fled | €448M+ net revenue LOSS |
France | ISF wealth tax | 10,000+ wealthy left | €200B capital flight; cost 2x revenue |
Sweden | Wealth + inheritance | IKEA, Tetra Pak, H&M founders left | Abolished 2007; founders returned |
UK | Non-dom abolition | 10,800 millionaires left 2024 | 1 millionaire every 45 minutes |
California | 13.3% income tax | 1.2M net population loss | $102B income fled (2020-22) |
Germany | Wealth tax | Constitutional issues | Suspended 1997, never reinstated |
Austria | Wealth tax | Enforcement costs | Repealed 1993 |
Netherlands | Wealth tax | Capital flight | Scrapped |
OECD trend: In 1990, 12 OECD countries had wealth taxes. By 2017, only 4 remained.[2]
Possible Counter-arguments, and responses
Counter-argument | Counter-counter-argument | Source |
"rate > growth means inevitable concentration" (classic Piketty-esque argument) | r > g is the incentive to save (Böhm-Bawerk); taxing it destroys capital formation | Böhm-Bawerk, Capital and Interest[6] |
"Inherited wealth is unearned" | SOMEONE earned it; 81% of millionaires are self-made; punishes saving | Friedman Letter[10] |
"Shareholders extract, don't create" | Capital bears risk workers can't, advances wages, enables roundabout production | Böhm-Bawerk; Mises[6] |
"Labor theory says capital income = theft" | Böhm-Bawerk demolished this 1890s; profit = compensation for TIME | FEE[7] |
"Other countries make it work" | 12→4 OECD countries kept wealth tax; Sweden, France, Norway, UK, California all failed | TaxPayers' Alliance[2] |
"We'll prevent capital flight with exit taxes" | Norway tried — people left FASTER before exit tax took effect; "Berlin Tax Wall". Unless you want to become a dictator, it won't work. | Haga/Daily Economy[15] |
"The rich won't actually leave" | UK: 10,800 left in one year. California: 1.2M net loss. France: 10,000+. They DO leave. | Multiple sources cited above |
Key Sources Summary
Author/Source | Work | Key Finding |
Pichet (2008) | "Economic Consequences of French Wealth Tax" | €200B capital flight; €7B annual shortfall (2x revenue)[5] |
Friedman et al. | Open Letter (700+ economists) | Estate tax = double/triple taxation; punishes virtue[10] |
Feldstein & Slemrod | NBER papers | Lock-in effect; inflation taxation[3] |
Henrekson & Du Rietz (2014) | "Rise and Fall of Swedish Wealth Taxation" | SEK 500B+ offshore flight; major factor in 2007 repeal[24] |
Joint Economic Committee (2003) | "Economics of Estate Tax" | $497B capital stock reduction; negative net revenue possible[1] |
Chamley-Judd | Theorem | Optimal capital tax = 0[8] |
TaxPayers' Alliance (2023) | "Economic Study on Wealth Taxes" | 4-5% GDP reduction; 12→4 OECD countries[2] |
Heritage Foundation (2024) | "If You Tax Them, They Will Run" | 2.8M Americans fled high-tax states (2020-23)[33] |
Henley & Partners (2025) | Wealth Migration Dashboard | UK lost 10,800 millionaires in 2024[28] |
California LAO (2024) | Migration Report | $102B income left California (2020-22)[36] |
Sources, Footnotes, Links
Academic Sources
Pichet, E. (2011). "France's 2011 ISF Wealth Tax Reform: Logic, Risks and Costs." SSRN. Link
Mises Institute. "A Primer on Austrian Economics." Link
Adam Smith Works. "Adam Smith on the Labor Theory of Value." Link
Fortune (2024). "Wealthy Norwegians flee to Switzerland to evade high wealth taxes." Link
Bloomberg (2024). "Billionaires Fleeing Norway Face Stricter Taxes in New Plan."Link
Tax Journal (2023). "Wealth tax: the debate continues." Link
CNBC (2025). "UK's millionaire exodus spells more trouble for Labour." Link
The Agency Mallorca (2025). "UK Millionaire Exodus: Why the Wealthy Are Leaving." Link
The Capitolist (2024). "California exodus continues, Florida remains primary destination." Link
moveBuddha (2024). "Golden State Exodus: California Migration Report." Link
Yahoo Finance (2024). "Rich Americans are ditching California." Link
THE ECONOMICS OF THE ESTATE TAX: AN UPDATE A JOINT ECONOMIC COMMITTEE STUDY. (2003). Link
Jalles, J.T. and Karras, G. (2025). Rethinking tax progressivity: a new look at its role in OECD economic growth. International Tax and Public Finance. Link
Eugen von Bohm-Bawerk (1890). Capital and Interest: A Critical History of Economic Theory
[1] Joint Economic Committee (2003). "The Economics of the Estate Tax: An Update." US Senate. PDF Link
[2] TaxPayers' Alliance (2023). "Economic Study on Wealth Taxes." Link
[3] Feldstein, M. & Slemrod, J. "The Lock-In Effect of the Capital Gains Tax." NBER Working Papers. NBER Link Link
[4] Progress and Poverty Institute (2024). "Why Wealth Taxes Were Repealed in Europe." Link
[5] Pichet, E. (2008). "The Economic Consequences of the French Wealth Tax." SSRN. Link
[6] Foundation for Economic Education. "Eugen von Böhm-Bawerk: A Sesquicentennial Appreciation." Link
[7] Foundation for Economic Education. "We're Still Haunted by the Labor Theory of Value." Link
[8] NBER. "Distortion Costs of Taxing Wealth Accumulation: Income Versus Estate Taxes." Link
[9] National Taxpayers Union Foundation. Analysis of combined corporate + capital gains taxation rates.
[10] Friedman, M. et al. "An Open Letter from Economists on the Estate Tax." (700+ signatories including Nobel laureates). PDF Link | Friedman Letter Site
[11] Tax Foundation. "The Estate Tax is Double Taxation." Link
[12] Canadian Affairs / AFP (2025). "Norway's wealth tax drove out the rich without breaking the bank." Link
[13] CitizenX (2024). "Norway's Wealth Tax Unchains a Capital Exodus." Link
[14] Reason Magazine (2023). "Wealth Taxes Result in Rich People Fleeing, Turns Out." Link
[15] The Daily Economy (2025). "How Billionaires Became an Endangered Species in Norway." Link
[16] BNN Bloomberg (2019). "France Tried Soaking the Rich. It Didn't Go Well." Link
[17] Wikipedia. "Solidarity tax on wealth" (citing Senator Philippe Marini report). Link
[18] Helen Suzman Foundation. "Wealth Taxes V: International Experience (Case Studies)." Link
[19] Newsweek (2005). "Flight of the French." Link
[20] The Conversation (2024). "Calls grow in Europe for wealth tax to finance the green transition." Link
[21] No More Tax (2015). "IKEA's Founder Paid Tax for the First Time in 42 Years." Link
[22] World Taxpayers Associations (2016). "Fiscal Lessons: Ten Years Without the Swedish Inheritance Tax." Link
[23] The Local Sweden (2018). "Does Sweden's tax system really screw the rich?" Link
[24] Henrekson, M. & Du Rietz, G. (2014). "The Rise and Fall of Swedish Wealth Taxation." ResearchGate. Link
[25] LSE Economics. "Do the Rich Flee Wealth Taxes? Evidence from Scandinavia." Slides PDF
[26] Family Business Magazine (2013). "Ikea founder moving back to Sweden." Link
[27] Institute of Economic Affairs (2016). "How high-tax Sweden abolished its disastrous inheritance tax." Link
[28] IMI Daily (2025). "UK Lost 10,800 Millionaires in 2024 As Non-Dom Changes Spark Record Exodus." Link
[29] City AM (2025). "Millionaires leave Britain in record numbers since Labour took power." Link
[30] Fortune Europe (2025). "U.K.'s wealth exodus has only just begun." Link
[31] GB News (2025). "Number of millionaires leaving UK spikes under Labour." Link
[32] Tortoise Media (2025). "Reeves tweaks non-dom tax as fears of ultra-rich exodus grow." Link
[33] Heritage Foundation (2024). "If You Tax Them, They Will Run: Millions of Americans Flee from California and New York." Link
[34] First Due Movers (2025). "States Moving Out: Top 5 Exodus." Link
[35] Wikipedia. "California exodus." Link
[36] California Legislative Analyst's Office (2024). Via AD74 Davies. Link
[37] Fox Business (2023). "Wealthy Californians are fleeing the state, putting tax revenue at risk." Link
[38] Silicon Valley News (2024). "5 charts that explain the California Exodus." Link
[39] The Real Deal (2025). "Slew of companies leave California in 2025, next year could be worse." Link
[40] PODS Blog. "Why Are People Leaving California — and Where Are They Going?" Link
[41] Fortune (2025). "Peter Thiel and Larry Page are preparing to flee California." Link
[42] Orange County Register (2021). "Elon Musk's California exit can save him $2 billion in taxes." Link
[43] RedState (2025). "New Reason Billionaires May Flee California." Citing Chamath Palihapitiya. Link
[45] https://taxfoundation.org/taxedu/primers/primer-not-all-taxes-are-created-equal/
[46] https://link.springer.com/article/10.1007/s10797-025-09902-y
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