The Zucman Proposed Global Wealth Tax Would Cost Up to 20 million Jobs, $100 billion in labor income, and $800 Billion in Global GDP in the first 10 years, then get worse

A major new macroeconomic analysis finds that a coordinated 2% global minimum tax on billionaire wealth—proposed by economist Gabriel Zucman and commissioned by the G20—would inflict significant, sustained harm on the global economy, workers, and investment.

The study, titled Macroeconomic impacts of a coordinated global minimum effective taxation standard for ultra-high-net-worth individuals was conducted by QUEST at EY on behalf of the Tholos Foundation and Americans for Tax Reform.

The study estimates the following average annual costs over the first ten years (relative to the size of the 2025 global economy):

  • Global GDP reduced by an average of $80 billion per year. After the first ten years, the damage gets even worse, with global GDP reduced by an average of $120 billion per year. 
  • Global employment reduced by an average of 2.0 million jobs each year.
  • Global labor income reduced by an average of $10 billion each year. After the first ten years, global labor income is reduced by an average of $50 billion each year. 

According to the study:

“Implementing a 2% coordinated minimum tax on billionaire wealth would increase the effective tax rate (ETR) on capital held by billionaires. This raises the user cost of capital for billionaire-owned assets, reducing the after-tax return on investment. A higher cost of capital discourages new investment and slows capital accumulation, reducing the capital stock available to workers over time. Lower capital per worker decreases labor productivity, which in turn reduces wages and employment. These effects compound over time as reduced investment leads to persistently lower capital stocks, generating sustained reductions in gross domestic product (GDP), wages, and employment.”

The study is a best estimate on the macro costs to taxing billionaire wealth. These effects compound over time as it leads to declining investment and avoidance strategies where wealth is actually stored in bedding rather than the economy. 

The study notes that real-world avoidance, incomplete international coordination, and enforcement challenges complicate any type wealth tax. 

According to Forbes, 45 percent of global billionaire wealth is headquartered in the United States, the next largest share 12 percent is in China, followed by single digit shares held by countries as disparate at India, Germany, Russia, and the UK. 

Americans for Tax Reform and the Tholos Foundation urge policymakers in the United States and around the world to reject the Zucman proposal and any similar schemes. Economic growth, not redistribution through higher taxes on investment, is the only reliable way to raise living standards.

Grover Norquist, President of Americans for Tax Reform, said:

“The wealth tax will harm working households and kill millions of jobs. These numbers should end any discussion of a wealth tax,” said Grover Norquist, President of Americans for Tax Reform. ‘Wealth’ isn’t stashed under giant pillows. It is factories, steel mills, trucks, warehouses, office buildings, scientific research. You cannot tax capital without taxing the people who work with that capital.”

Christopher Butler, Executive Director of the Tholos Foundation, said:

“Wealth taxes have failed repeatedly in OECD countries because capital is mobile and hard to value. If you are worried about wealth being concentrated in the hands of a few, the solution is more billionaires not kneecapping successful entrepreneurs. Free markets and growth—not punitive taxes on success—are the proven path to opportunity for everyone.”

Daniel J. Mitchell, President of the Center for Freedom and Prosperity, said:

“The class warfare crowd is targeting the rich, but ordinary workers will suffer considerable damage since wealth taxes mean less saving and investment, which means lower productivity and reduced wages for workers. Every economic theory agrees that capital formation is a key driver of productivity increases and higher wages, so it is profoundly foolish to impose a wealth tax that will dramatically reduce incentives for saving and investment.”

Phil Magness, Senior Fellow at the Independent Institute and the David J. Theroux Chair in Political Economy, said:

“As this report illustrates, Gabriel Zucman’s 2% minimum global wealth tax proposal is built upon shaky assumptions that overstate its revenue yield and downplay its potential for severe economic harm. Although this tax scheme is presented using the language of neutral academic analysis, closer scrutiny reveals that its calculations are plagued by uncertainty and untested claims about how a global wealth tax would operate in practice.”

You can find the whole study here.