If Senator Bernie Sanders had his way, billionaires would not exist.

To Bernie and his supporters, nobody should have that much money. In their view, it’s not "fair."

Progressive politicians like Senator Elizabeth Warren and Representative Ro Khanna agree. Together with over 45 members of Congress, they have proposed a policy to fix things: they call it "a wealth tax."

It's the latest chapter in the ever-popular "tax the rich" playbook. 

But will it actually work—or will it backfire on the very people it's supposed to help?

Let's take a closer look.

For starters, a wealth tax is fundamentally different from any tax you pay today. Think of it this way:

An income tax taxes what you earn.

A sales tax taxes what you spend.

A wealth tax taxes what you own.

Now, you might think: we already tax what people own — it's called a property tax. But a property tax only reaches tangible assets tied to land, such as houses and office buildings. A wealth tax goes further. It applies to just about everything else — stocks, business ownership, artwork, you name it.

That’s a wealth tax. 

If it sounds like a progressive politician’s fantasy, you’re not wrong.  They’ve tried it in Europe — a bunch of times. And it’s failed — a bunch of times. 

By 1990, twelve European nations had a wealth tax. Since then, nine of them have dropped it.

Why? Because it suffers from three fatal flaws.

Fatal flaw #1: It Taxes "Paper Wealth" 

Most people’s wealth isn't sitting in a vault full of gold coins like the fortune of Scrooge McDuck. It's either tied up in illiquid assets—like farmland, businesses, real estate, and collectibles—or it’s in the assets that people buy and hold because they think it will appreciate in value, like your stock portfolio or retirement account. 

Calculating non-cash assets every year is an exercise in guesswork. How much is a family-owned farm or an unproven tech company worth on any given Tuesday?

With that in mind, does it sound fair to you that an entrepreneur who builds a business worth $10 million on paper, but only takes home a $100,000 salary, owes a 2% wealth tax of $200,000?

Where is he going to get that money? Most likely, he’d be forced to sell pieces of his business, lay off workers, or shut down entirely to pay the government for "wealth" he hasn't actually realized.

Fatal flaw #2: Wealth Has Wings

When you tax sales, people complain. When you tax wealth, people leave.

Capital is mobile. If a country—or a state, like say, Illinois—were to punish people for owning assets, the wealthy won't just sit around and take it—they’ll pack up and move. 

Under France's wealth tax, wealthy taxpayers fled the country, taking with them an estimated $228 billion in capital, dragging down GDP growth.

And when those wealthy taxpayers left, they took their investment capital, their future businesses, and their job creation with them. France lost far more in capital flight and slower economic growth than it ever collected from the wealth tax itself.

Which explains why they got rid of it in 2018. 

It’s also why the Democratic governor of high-tax New York, Kathy Hochul, said in 2026, “The fact is, I need people who are high net worth to support the generous social programs that we want to have in our state.”

Fatal flaw #3: The "Billionaire Only" Myth

Proponents love to reassure us by saying: "Don't worry, this tax will only apply to billionaires! They have more money than they know what to do with. They’re not gonna miss a few million."

Don't be fooled.

History has shown that targeted taxes never stay targeted.

When the federal income tax was introduced in 1913, politicians promised it would only apply to the ultra-wealthy top 1%, and it would just be a few measly percentage points.

Today, the income tax reaches deep into the middle class, with top rates of up to 37 percent.

A wealth tax won’t be any different. When big-government spending inevitably outpaces the revenue collected from a few hundred billionaires, politicians won't cut spending—they'll just lower the “wealth tax” threshold. Today's "billionaire tax" becomes tomorrow's tax on your 401(k), your family home, and your small business.

But let’s say this time, they really stick it just to the billionaires and leave the rest of us alone. It still won’t do any good. The billionaires will be okay—they’ll move themselves, their money, and the jobs their businesses create somewhere else. 

Consider what happened in California when there was just the threat of a wealth tax. Google founders Sergey Brin and Larry Page moved their business entities out of California and bought homes in other states. So did Meta founder Mark Zuckerberg, Uber founder Travis Kalanick, and many others.

So, who actually pays when wealth flees? Everyone who stays.

Maybe billionaires aren’t so bad after all.

I’m Benjamin Jaros, economist and research fellow at the Hoover Institution at Stanford University, for Prager University.