Saying It Out Loud August 2026, By Pat Soldano and Tim Schultz

Wealth Taxes Have Failed, Been Abandoned Around the World, So Why Are We Considering It in U.S.?

A wealth tax sounds like a straightforward way to reduce economic inequality, but European history proves it is a failed experiment that inflicts severe collateral damage on the backbone of the economy: family-owned businesses.

Over the past three decades, most European nations that once championed wealth taxes—including France, Sweden, Germany, Denmark, and Austria—have quietly or overtly abolished them. The Netherlands, Finland, Iceland, and Luxembourg all dumped their wealth tax laws in the early 2000’s.

They did not abandon these policies out of a sudden wave of sympathy for the ultra-rich, but rather out of cold, hard economic pragmatism. When applied to real-world economies, wealth taxes consistently trigger massive capital flight, cost more to administer than they generate, and threaten the survival of illiquid, multi-generational family-owned businesses.

To understand why wealth taxes fail, one must first look at the European experience.

Here’s a snapshot of wealth tax fails.

In 1990, twelve European countries levied an annual tax on an individual’s net wealth. By the late 2010s, only three remained. The primary driver of this mass repeal was capital flight. Let’s face it, wealthy individuals are highly mobile.

When faced with an annual penalty simply for holding assets or savings, they move themselves, their companies, and their capital to more hospitable economic climates. One example is France’s notorious Impôt de Solidarité sur la Fortune (ISF).

The ISF serves as the ultimate cautionary tale.

The French government estimated that between 2000 and 2016, tens of thousands of millionaires left the country, taking billions of euros in investment capital with them.

French economist Éric Pichet calculated that the ISF cost the French state twice as much revenue as it generated, because the loss in income taxes, value-added taxes (VAT), and corporate taxes from fled individuals far outweighed the wealth tax collected.

President Emmanuel Macron finally abolished the broad wealth tax in 2018 to restore France’s economic competitiveness.

Sweden’s wealth tax follows a similar pattern.

Long considered the gold standard of social democracy, Sweden repealed its wealth tax in 2007. The tax had driven iconic Swedish entrepreneurs, including the founders of IKEA and Tetra Pak, to flee the country along with an estimated $1.5 trillion Swedish kronor in capital.

The Swedish government realized that punishing asset accumulation stifled domestic investment, lowered productivity, and ultimately hurt the very working-class citizens the tax was designed to help.

Germany’s Federal Constitutional Court struck down its wealth tax in 1995, declaring it unconstitutional because valuation methods were inherently unequal and arbitrary.

Toxic Valuations

The administrative nightmare of family business valuation is precisely where wealth taxes become toxic for the families and their businesses.

Unlike publicly traded stocks, which have a transparent, real-time market price, valuing a mid-sized, multi-generational, family-owned manufacturing business or a regional trucking business on an annual basis is an impossible task.

It requires complex appraisals of machinery, intellectual property, real estate, and projected future cash flows. If the government overvalues the business, the family faces an inflated tax bill based entirely on paper wealth. If the business appeals, both the state and the business owner become bogged down in endless, expensive legal disputes.

The fundamental, structural flaw of a wealth tax is that it taxes paper valuation rather than actual liquid income.

Family businesses can be asset-rich but cash-poor. A family-owned business might own millions of dollars worth of specialized machinery, factories, and inventory, but its actual yearly profits are typically reinvested directly back into the company to buy better equipment, fund research and development, or hire more workers. The owners do not have millions of dollars sitting in a bank account.

When a wealth tax is levied on the paper value of business assets, the family of the family-owned business faces a dangerous liquidity crisis. Because the business lacks the spare cash to pay the tax, the family is forced to make destructive choices. They must either strip the business of its operating capital, halt planned expansions, freeze hiring, or take on high-interest debt just to pay the government.

In the worst-case scenarios, families are forced to sell a minority stake to private equity firms or liquidate the business entirely. This effectively breaks up a stable, community-oriented enterprise and transfers control to short-term, profit-maximizing corporate entities.
Furthermore, wealth taxes penalize economic resilience.

Family-owned businesses are uniquely structured to survive economic downturns because they plan across generations, not quarterly earnings reports.

During a recession, a family business will often absorb losses and retain its workforce out of a sense of loyalty to its community. However, a wealth tax does not care if a business is currently losing money. Because the underlying assets (the land, the buildings, the equipment) still exist, the wealth tax remains due. Forcing a business to pay an asset or savings penalty tax during an economic crisis is a recipe for bankruptcy, leading directly to job losses and diminished economic output.

Exemptions Don’t Work

Supporters of wealth taxes argue that exemptions can be carved out for business assets to protect family firms. But European attempts at exemptions were a mess. Creating exemptions immediately turns the tax code into a sieve, encouraging aggressive tax planning where wealthy individuals shift liquid assets into exempted business structures to avoid the tax.

This leaves governments with two bad choices: either enforce a pure wealth tax that destroys family-owned businesses or create exemptions that defeat the revenue-generating purpose of the tax while vastly increasing tax code complexity.

Ultimately, the global retreat from wealth taxes reflects a growing realization that taxing the engines of job creation is counterproductive.
When family-owned businesses are forced to redirect their capital from productive investments toward annual tax compliance and forced liquidations, the entire economy suffers. Wages stagnate, innovation slows, and local communities lose their most stable employers, family businesses.

Reviving a wealth tax is a retrogressive step that ignores decades of international failure, threatening the survival of the very family enterprises that form the bedrock of economic stability.

Sept. 23: Congressional Family Business Caucus

The two co-chairs of the Congressional Family Business Caucus, Rep. Lou Correa (D-CA) and Rep. Claudia Tenney (R-NY), are getting ready for the final Caucus meeting of the year.

On September 23, the bipartisan Caucus will be held on Capitol Hill. Its mission is focused solely on the challenges family-owned businesses and the families that own them. The Caucus now has 49 members, split fairly evenly between Republicans and Democrats.

The September 23 Caucus meeting theme is: “The Price of Prosperity: Family Business Strategies for Battling Wealth Taxes.”

It’s an appropriate subject based on the many new potentially damaging wealth tax proposals being offered to voters in this cycle, and into 2027. And, based on the experiences of other countries, we hope these proposals will fall by the wayside, like they did overseas, and we can carry on helping family businesses grow and prosper.