On the social acceptance of a capital levy

Abstract

Addressing the COVID-19 crisis imposes significant fiscal costs. In order to close these budget deficits, one-off taxes on larger wealth are sometimes demanded, lately in Germany as well. Past experience with capital levies relates to unusual post-war situations. The financial and social results of such levies have been mixed at best. The broad social and political acceptance of one-time capital levies is poorly known. We consider the unique, historical case of a referendum on a one-time capital levy. The overwhelming rejection of a large capital levy in a democratic country suggests that the population was persuaded by the opponents’ arguments, first and foremost the impossibility of guaranteeing its one-off nature.