Abstract
ABSTRACT The international debate on wealth taxation has been subject to renewed interest amid new proposals coming out of the US electoral cycle and the salience of wealth inequality. This article reviews the case for taxing wealth and its transfer across generations (wealth and inheritance taxes), analyzing their design from an international comparative perspective, and extracting lessons for Brazil. The long-debated “Tax on Large Fortunes” has never been implemented and the state-level “Tax on Inheritances” has been watered down over time. We propose a framework for the progressive implementation and reform of both taxes in the country. We argue, given the historical record and current research, that they are technically and administratively feasible propositions, notwithstanding important political economy considerations.
Highlights
The distributive function of taxation is becoming increasingly relevant in a context of rising income and wealth inequality across much of the world (Alvaredo et al, 2018)
In Brazil, economic inequality is seen as an important social problem, top-end concentration (Barros et al, 1995; Hoffmann, 2002; Medeiros, 2006; Soares, 2010; Souza, 2018)
This section discusses in more detail the taxation of wealth in Brazil – the Tax on Large Fortunes, as introduced in the Brazilian Constitution in 1988 – and the taxation of wealth transfers – the inheritance tax levied by the state governments
Summary
The distributive function of taxation is becoming increasingly relevant in a context of rising income and wealth inequality across much of the world (Alvaredo et al, 2018). Brazil’s inequality is weakly affected by the existing personal income tax due to a mix of regressive exemptions and low marginal tax rates (Morgan, 2017; Gobetti and Orair, 2017) It is in this context that we discuss the potential for wealth and inheritance taxes as an added redistributive instrument in Brazil. Annual wealth taxes are more salient for the majority of the population, as low rates and high thresholds are generally applied They have been used a lot less frequently throughout history. The combination of financial deregulation with government de-nationalization, and capital and trade liberalization, has paved the way for rising inequality in the “neo-liberal” age This gives the recurrent wealth tax greater relevance as a tool to deal with inequality and its social problems. We conclude with political economy remarks in the last section
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