Nobel Economist Warns Against Wealth Tax to Pay for Pandemic

A wealth tax is a bad way to pay off pandemic debts and probably would become permanent if introduced, Nobel Prize-winning economist Angus Deaton said.

Levies on high-earners would be “very difficult to implement” and give the wealthy “huge incentives to avoid it -- and avoid it they will,” said Deaton, a Princeton University professor who is working on an official study of inequality in the U.K.

The remarks brush against a growing number of politicians calling for the richest to shoulder more of the burden of the record borrowing taken on by governments to prop up economies hit by Covid-19. The International Monetary Fund this week said a temporary levy would help to alleviate social inequalities that have deepened in the pandemic.

The author of the book “Deaths of Despair,” which he co-wrote with his wife fellow economist Anne Case, said in an interview that a one-time wealth tax is “likely to turn into a permanent,” just as the income tax did. Britain introduced taxes on pay to fund the Napoleonic War, and now it’s one of the most prominent sources of revenue.

After a decade of austerity in Britain following the financial crisis, Deaton also recommended against cuts to social services, warning that “the doom sayers, the deficit hawks, the austerity mavens” created a disaster by slashing funds for health and education.