A few days ago, the YouTube channel Money & Macro published a video called “What happens when you stop taxing billionaires?” It is worth watching. For about fifteen minutes, it does a solid job of explaining why wealth taxes fail. Then it spends the last four minutes proposing a grab bag of alternative wealth taxes - with none of the scrutiny it just applied to the first one.
The video is instructive because it shows how even a well-researched critique can collapse the moment it reaches the conclusion the author was afraid to draw. And it misses the single most important case study in European wealth taxation: France.
What the Video Gets Right
The video’s core argument is sound. Wealth taxes raise surprisingly little revenue because the tax base is mobile, valuation is expensive and contentious, and avoidance is easy. The Scandinavian evidence is presented clearly: Norway’s wealth tax raises about 0.5 percent of GDP, Sweden abolished its wealth tax in 2007 after it became more trouble than it was worth, and the rich responded by moving, restructuring, or simply not paying.
The “how many actually leave” segment is the strongest part. It shows that even a small outflow of wealthy taxpayers can wipe out the revenue gains from those who stay, because the tax base follows the people. This is not a controversial finding - it is consistent with the academic literature, including work by economists who support higher taxes on the rich.
I covered this territory in Why You Shouldn’t Care About Billionaires and California’s Wealth Tax. The mechanism is well-understood. What the video misses is the case study that proves the point more clearly than any of them.
The France-Shaped Hole
The video uses Norway, Sweden, and Denmark as its European case studies. These countries all have or had wealth taxes, but they are narrow, high-threshold systems with extensive exemptions. They are not the best test of a broad-based wealth tax.
France is.
From 1982 to 2018, France had the Impôt de Solidarité sur la Fortune (ISF) - a broad-based annual wealth tax on net assets above roughly €1.3 million. It covered financial assets, real estate, businesses, art, everything. It was the most ambitious wealth tax in the developed world, running for nearly four decades.
The results were damning.
Capital flight since the ISF’s inception is estimated at €200 billion. The French tax authority itself estimated that the annual economic cost of the tax - in lost investment, reduced economic activity, and tax avoidance - was roughly €7 billion, or about double what the tax actually raised. For every euro the ISF brought in, it cost the French economy two.
The tax was particularly destructive for small and medium businesses. The threshold was low enough that successful family businesses were frequently caught. Owners had to pay an annual tax on the value of their business - a business that might not generate enough cash to pay the tax, forcing them to sell shares, take on debt, or move the business abroad. The result was a tax that fell hardest on the productive middle class of entrepreneurs, not the idle rich with diversified portfolios.
The ISF was finally abolished in 2018 and replaced with the IFI (Impôt sur la Fortune Immobilière), which applies only to real estate. The logic was straightforward: real estate cannot be moved to Belgium. A wealth tax on mobile assets had proven unworkable, so the government limited it to the one asset class that cannot flee.
The video’s omission of France is not a minor oversight. France ran the experiment the Scandinavian countries did not: a broad-based wealth tax, at scale, for decades. The result was unambiguous failure. Including France would have made the video’s core argument irrefutable. Leaving it out leaves a hole that anyone familiar with the literature will notice immediately.
I Know People This Actually Happened To
A retired couple I know are, by their own description, socialists. They believe in higher taxes on the rich, more redistribution, and a smaller role for markets. They are sincere in these beliefs.
They owned a house in France and some rental properties in England, which were intended to provide their pension. Their French house was lovely, but not extravagant - a family home in a small country town. When the ISF threshold caught them - the value of the house plus their UK property pushed them over the line - they faced a choice. Pay the annual tax, which was significant relative to their income, or sell and leave.
They sold the house and moved back to England. The French wealth tax had driven a pair of avowed socialists out of the country.
The irony was not lost on me, perhaps their only free market friend. The people who believe most strongly in wealth taxes are often the ones who will go to the greatest lengths to avoid paying them, because the cost is real and personal in a way that the theory never accounts for. The French tax did not just fail on paper. It failed in practice, one household at a time.
Where It Goes Off the Rails
After establishing that wealth taxes fail, the video pivots suddenly to proposing alternatives: higher capital gains taxes, inheritance tax reform, mark-to-market taxation on unrealized gains, land value taxes. Each is presented as a smarter way to tax the rich.
What is missing is any analysis of why these alternatives would not fail in the same way.
Mark-to-market taxation on unrealized gains - taxing people on income they have not actually received - would create liquidity crises for anyone whose wealth is tied up in assets that cannot be easily sold. It would force founders to sell control of their companies just to pay the tax bill. It would require annual valuations of every private asset, which is exactly the administrative nightmare that doomed the ISF. The same problems, repackaged.
Higher capital gains rates sound straightforward until you consider the lock-in effect: people hold assets longer to defer the tax, which reduces market liquidity and capital mobility. The result is less investment and slower growth.
Inheritance tax reform has its own well-documented problems: it falls hardest on family businesses and farms that are asset-rich but cash-poor; it drives capital to jurisdictions without inheritance taxes; and its administrative costs are high relative to its yield.
Land value taxes are probably the strongest of the alternatives - they have a good theoretical case and some limited empirical support - but they are politically toxic and administratively difficult to implement at scale. Every country that has tried a serious land value tax has watered it down or abandoned it.
The video spends fifteen minutes showing that the first tax class fails, then spends four minutes proposing a dozen more without applying the same scrutiny. This is the same pattern I identified in The Grievance Machine, Part I: identify a problem, propose a solution, and when the solution fails, do not re-examine the premises - just propose more of the same.
What This Means
The honest conclusion the video was reaching for - but could not bring itself to say - is that taxing wealth directly is harder than it looks. The tax base is mobile. The valuation is expensive. The avoidance is easy. The politics are brutal. A dozen alternative wealth taxes will not fix these structural problems, because they are not features of a specific tax design. They are features of trying to tax something that can move, hide, or restructure itself faster than the tax code can adapt.
The French ISF was the longest-running test of a broad-based wealth tax in the developed world. It failed. The French government admitted it failed and replaced it with a narrower tax on the one asset that cannot leave. That is the closest thing to a controlled experiment we have.
The next time someone proposes a new wealth tax, ask one question - did you know about the French ISF? If the answer is no, they have not done their homework. If the answer is yes, ask them why they think theirs would be different.