The debate around wealth tax often centers on concerns about double taxation. Critics argue that it taxes money that has already been taxed in different forms, such as savings, real estate, stocks, and wealth that comes from pre taxed sources like salaries, capital gains, professional income, donations, and legacies. When real estate is involved, critics describe a phenomenon of multiple taxation, with today’s wealth tax compounding what is already taxed through the annual property tax, municipal charges, or capital gains on property sales. This is one of the arguments historically used to oppose the tax in some contexts, including in Sweden.
This tax reform advocates, however, contend that double taxation does not occur in the way critics fear, for example when value added tax is applied to goods or services acquired from income that has already faced income tax under the IRPF system.
wealth tax, among the wealthy reform or abolition
Some critics warn about a natural tendency for taxes to confiscate wealth. They warn that the tax could be paid from income even when that income is not generated every year, raising concerns about the fairness of the burden. In a White Paper for tax reform prepared by the Institute of Economic Research, a group linked to major business organizations emphasizes the argument that fiscal progressivity should focus on personal income tax, with higher rates only when there is a need to increase revenue. A notable interview in El Periódico de Catalunya raised the point that inheritance tax can impose payments regardless of current income, a claim that has been used to question the equity of such a system.
set limits
To address these concerns, the law includes caps on how much income is affected by both taxes. There is a joint limit that prevents the combined tax from exceeding a certain share of annual income. The rule anchors the taxed amount at no more than 60 percent of the income base for IRPF, while ensuring that a minimum 20 percent of the wealth tax is paid on the first tranche. Critics argue that a confiscatory aspect persists, highlighting that even very low incomes may trigger a minimum wealth tax payment of 20 percent of the wealth tax base.
In practice, the 60 percent cap changes the effective burden on high-value assets. Estimates from experts associated with the White Paper on Tax Reform, commissioned by the government to a panel of specialists, suggest that wealth tax can be substantially reduced for assets in the upper ranges. For example, a taxpayer with assets around 112 million euros and annual income of one million euros would see the initial wealth tax payment drop dramatically after applying the cap, from 3.7 million to around 740,962 euros. These projections come from assessments by economists who work with the Tax Advisory and the General Council of Economists, reflecting the impact of the cap on the top tier of wealth.