The Wealth Tax That Could Topple a Government: What Europe's Own Record Says About Taxing Fortunes

The Netherlands' government is less than nine months old, and it may not see its first birthday. Prime Minister Rob Jetten's three-party minority coalition, which holds just 66 of the 150 seats in parliament, is near collapse after two of its parties cut a tax deal with the opposition that the third partner says blindsided it, the Associated Press reported.

At the center of the fight is a tax on wealth. It is worth understanding, because the same idea keeps coming back on this side of the Atlantic, too.

On Wednesday, Jetten's D66 party and the Christian Democrats agreed with two opposition parties, the left-wing PRO party led by Jesse Klaver and the pro-European Volt, to amend the government's 2027 tax plan, NL Times reported. The deal shifts about €1 billion a year in taxes away from work and onto wealth, scaled back from the €1.5 billion the left had originally sought.

The main change hits the tax on savings and investments. The general rate would fall slightly, from 36% to 35.5%, but a new top rate of 38.5% would apply to taxable investment returns above €60,000 a year. NL Times noted that someone with €1 million in shares earning 6%, or €6 million earning 2%, would be in the new top bracket. The deal also freezes a threshold on large shareholdings until 2031 and restricts paper gifts used to pass on wealth, in exchange for an income-tax cut for workers. Klaver has sold it as a way to make the wealthiest pay their fair share.

The third coalition partner, the free-market VVD, did not sign on. Its leader, Defense Minister Dilan Yeşilgöz, said her party had been ambushed and called the plan "a poor proposal. Furthermore, it runs counter to the coalition agreement". VVD parliamentary leader Ruben Brekelmans told parliament Thursday that his party will vote against the entire tax plan if the amendment passes. "This is a deal that the VVD cannot support," he said. Jetten skipped a European summit in Ireland to attend the debate.

The left's pitch sounds simple: tax the rich, cut taxes for everyone else. Europe has tested that theory for decades, and the results are not encouraging.

According to the OECD, the number of member countries with a net wealth tax fell from 12 in 1990 to just four in 2017: France, Norway, Spain and Switzerland. Even where they survived, they raised little. In 2016, wealth taxes brought in between 0.5% of total tax revenue in France and 3.7% in Switzerland. The OECD said countries repealed them because of the economic costs and risk of capital flight, narrow tax bases, and high administrative costs compared with the modest revenue.

France, the most famous case, scrapped its broad wealth tax in 2018 and replaced it with a narrower tax on real estate only. That property tax raised about €2.2 billion from 186,000 households in 2024. Norway, which kept and raised its wealth tax, has seen some of its very wealthiest taxpayers move abroad, according to research cited by Solicitors Journal, though the same research found no significant drop in investment by their firms.

The lesson is not that the rich should pay nothing. It is that taxes aimed at fortunes rather than income tend to chase capital away, raise less than promised, and leave the middle class holding the bill when the money moves.

Americans have been asked the same question. This month, California voters rejected Proposition 40, a one-time tax on billionaires, by 52.8% to 47.2%. CalMatters reported that Google co-founder Sergey Brin had moved out of the state. If the bluest state in the nation will not sign on to a wealth tax, the idea's appeal at the ballot box is weaker than its champions admit.

In the Netherlands, the pushback is coming from inside the government. The VVD has made clear it will not back a tax plan built around the new levy, even if that puts its own cabinet at risk. Parliament passed a motion Tuesday saying that if the cabinet falls mid-term, lawmakers should first try to form a new coalition before calling elections. If that fails, the AP reported, the country would likely face its fifth general election in less than a decade.

Parliament votes first on the amendment and then on the full tax plan, which also needs the Senate. Whatever happens in The Hague, the takeaway for American taxpayers is plain. Wealth taxes are an old idea that most of Europe has already tried and abandoned. The better path to fairness is a simpler, flatter tax code that rewards work and investment, and that does not drive away the people and capital that create jobs.