A global tax on capital to stop the indefinite increase of wealth inequality, really?

I. INTRODUCTION The year 2014 (2013 for the French version) saw an unexpected book in the ranking of best sellers, both in physical and online stores: Capital in the Twenty-First Century from the French economist Thomas Piketty. The key takeaway of the book is that capitalist economies are skewed towards an indefinite accumulation of capital by the very wealthy, meaning wealth inequalities are only expected to increase with time. His proposal to tackle this issue is explained in the 15th chapter of his book, making the case of "a progressive global tax on capital (that is, a tax on the stock rather than on the flow as it is usually the case), coupled with a very high level of international financial transparency" as a way to "avoid an endless inegalitarian spiral and to control the worrisome dynamics of global capital concentration". Contextually, amount of literature dealing with economic inequalities has emerged over the past decades. Recently, Anthony B. Atkinson, worldwide acknowledged expert on the subject, professor at Oxford and at the London School of Economics, published a book called Inequality: What Can Be Done? (2015). In this book, he presents a set of 15 proposals geared towards tackling inequalities from various angles, and a property tax is but one of them. Also in 2015, Joseph E. Stiglitz, laureate of the Nobel Prize in Economics and former chief economist at The World Bank, published The Great Divide in which he, among others, gives his opinion about how economic inequalities are problematic. II. RESEARCH QUESTIONS We aim to answer the following question: «Is the introduction of a net wealth tax as defined by Piketty on Belgian residents with the objective of reducing wealth inequalities in Belgium desirable?». To do so, we break it down in three sub-questions, each representing a distinct part of this thesis. 1) Should something be done to reduce wealth inequalities in Belgium? 2) Is a net wealth tax as defined by Piketty an appropriate (theoretical point of view) and viable (practical point of view) tool to reduce wealth inequalities? 3) What would be the impact of the net wealth tax as defined by Piketty on wealth inequalities and other selected variables? III. ANSWERS Regarding question (1), as it seems that wealth inequalities have a negative impact on economic growth and as it seems that wealth inequalities are on the rise, we answer that some tool(s) should be used to try to reduce them. Regarding question (2), we conclude that the wealth tax as proposed by Piketty is not theoretically appropriate and not practically viable, at least in the short run. Regarding question (3), we estimate that a wealth tax can reduce inequalities in Belgium, with relatively low impact on the growth of the total stock of net wealth. We also estimate tax evasion behaviors of individuals to amount up to one quarter of actual tax revenues. However, while important, no estimations are done on variables such as gross domestic product or unemployment. IV. CONCLUSION Bringing everything together, we would rather not recommend the introduction of a net wealth tax as defined by Piketty on Belgian residents. What should nevertheless be noted is that Piketty pursues a very specific objective of inequality reduction, which has been proved to be attainable under our assumptions. Therefore, even if the theoretical justification of this tax is wobbly, one still may want to consider its introduction as soon as one agrees that the need of reducing wealth inequalities is crucial, keeping in mind that there could be other tools to reach the objective.