A capital levy is a tax on capital rather than income, collected once, rather than repeatedly. For example, a capital levy of 30% will see an individual or business with a net worth of $100,000 pay a one-off sum of $30,000, regardless of income. Capital levies are considered difficult for a government to implement. Some economists argue that capital levies are a disincentive to savings and investment, and cause capital flight, but others argue that in theory this need not be the case. The latter view was popular in the World Wars; in the 2010s, it has also gained some acceptance as more heavily indebted nations struggle to raise revenues.
Examples of capital levies
Ancient democracies
In ancient Athens during its democracy, there was a form of capital levy known as a liturgy. The liturgy might anything from financing a public play to supplying and manning a trireme for the navy. An Athenian could volunteer for such a levy, but if no-one volunteered, a wealthy person meeting the eligibility requirements would be ordered to supply it. They could escape by nominating someone wealthier to take over the duty; if the nominated person disputed this, the nominator could take the liturgy, or offer to exchange property with their nominee. If the nominee refused, the matter went to court, and the liturgy was assigned whoever the court case determined to be wealthier. Athenians often concealed their wealth to escape taxation, and sycophants who discovered concealed wealth might use it as blackmail material. Antidosis helped the state identify the wealthiest people, and kept the rich suspicious of one another. Athens also had a wealth tax called eisphora, and for this purpose the city required each rich person give an estimate of his fortune. These self-assessments were not very accurate. The liturgy has not been much studied by economists.
20th century
During both World Wars, capital levies were introduced, with the generally-stated aim of distributing the sacrifices required by the war more evenly. This had a significant effect on both income and wealth distributions, lasting decades into the post-war period. Such policies were commonly referred to as the "conscription of wealth". The Economist, a British publication, opposed capital levies, but supported "direct taxation heavy enough to amount to rationing of citizens' incomes"; similarly, the American economist Oliver Mitchell Wentworth Sprague, in the Economic Journal, argued that that "conscription of men should logically and equitably be accompanied by something in the nature of conscription of current income above that which is absolutely necessary".
21st century
The Italian government of Giuliano Amato imposed a 0.6 percent levy on all bank deposits on 11 July 1992. In 1999, Donald Trump proposed for the United States a one off 14.25% levy on the net worth of individuals and trusts worth $10 million or more. Trump claimed that this would generate $5.7 trillion in new taxes, which could be used to eliminate the national debt. The Cypriot government levied 47.5 percent of Bank of Cyprus deposits over one hundred thousand Euros in July 2013. In October 2013, the International Monetary Fund released a report stating, "The sharp deterioration of the public finances in many countries has revived interest in a 'capital levy' – a one-off tax on private wealth – as an exceptional measure to restore debt sustainability. The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be repeated, does not distort behavior." The next year the Bundesbank proposed that Eurozone countries should attempt a one-off levy of bank deposits to avoid bankruptcy. A February 2014 report by Reuters showed the idea had gained traction in the European Commission, which will ask its insurance watchdog later that year for advice on a possible draft law "to mobilize more personal pension savings for long-term financing".
