German Vice Chancellor Sigmar Gabriel rejected a wealth tax as “crazy” for business in a meeting with French economist Thomas Piketty, whose best-selling work calls for such a progressive levy on capital.
“A national wealth tax is dead,” Gabriel, the chairman of Germany’s Social Democratic Party, said on a panel at the Economy Ministry in Berlin alongside the economist.
Piketty, in town to promote the German translation of “Capital in the Twenty-First Century,” said leaders in the euro area had made “terrible decisions” by focusing excessively on paying back debt without investing in education. Pursuing the fiscal austerity favored by German Chancellor Angela Merkel during the euro-area debt crisis means it takes governments “extremely long” to pay down debt, he said.
Gabriel, who is Merkel’s economy minister, said he had once been “chairman of the wealth-tax fan club” within the SPD. Yet the tax wouldn’t work in Germany, where the government would be constitutionally required to tax business capital at the same rate as other assets, he said.
“It’s a crazy idea to tax this business capital” after German small businesses had built up capital stock, and a wealth tax would generate no more than 8 billion euros ($9.9 billion) a year, Gabriel said.
Piketty’s book fed into a national debate on inequality this year in the U.S. He uses data to document what he says is an accumulation and concentration of wealth in industrial societies not seen since the 19th century.
Italian Tax
Piketty argues that the tendency stems from a historically higher rate of return on capital than economic growth. One of his remedies is a progressive tax on wealth.
“The progressive wealth tax is the civilized form of inflation,” Piketty said today.
Piketty singled out former Italian Prime Minister Mario Monti, who carried out German-inspired austerity measures in an effort to win back investor confidence and reduce Italy’s borrowing costs. Monti, who was voted out of office last year, opted for a residential property tax that the next government suspended.
“People in Brussels, Paris and Berlin thought that Monti was a genius of public finances,” Piketty said. “But apparently the Italian electorate did not agree.”
To contact the reporter on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net
To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net Tony Czuczka, Leon Mangasarian
