How do you tax a billionaire without squeezing the middle class, small businesses or the entrepreneurs a country depends on for investment and growth?
That question is moving back toward the center of Greece’s political debate after former Prime Minister Alexis Tsipras called for shifting more of the tax burden toward the very wealthy and a small number of dominant corporations, while leaving small and midsize businesses untouched.
Tsipras has argued that “not one euro” should be added to the tax burden of smaller businesses. Instead, he says, policymakers should look toward the top of the economic pyramid and the handful of large companies that command an outsized share of the market.
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The proposal taps into a debate that extends well beyond Greece. Across advanced economies, governments are wrestling with a basic problem of modern taxation: Income is relatively easy to tax. Extreme wealth is not.
The distinction matters. A billionaire’sfortune typically doesn’t sit in a bank account or arrive in the form of a monthly paycheck. It is held in shares, privately owned companies, property, investment vehicles, trusts and other assets, often spread across several jurisdictions. Some of those assets have readily observable market prices. Others can be exceedingly difficult to value until they are sold.
The political slogan of “taxing the rich”
That makes the political slogan of “taxing the rich” considerably simpler than the tax policy required to accomplish it.
California offers one of the most closely watched tests of the idea. Voters there are set to consider a one-time tax equal to 5% of the wealth of people with fortunes exceeding $1 billion. The levy could be paid over five years and has qualified for the November ballot as Proposition 40.
Supporters say the measure could raise roughly $100 billion, with most of the money directed toward healthcare and smaller portions going to education and food assistance. California’s official fiscal analysts have offered a more cautious assessment, estimating proceeds in the tens of billions of dollars.
The gap between those estimates illustrates the central difficulty of taxing fortunes rather than income. The eventual revenue would depend on how assets are valued, how taxpayers respond, how much wealth can legally be brought within the tax base and how the measure fares in potentially lengthy court battles.
For Greece, those complications would be magnified by the structure of its economy and by tax policies adopted in recent years to attract wealthy residents and internationally mobile capital.
A serious attempt to tax very large fortunes would first require the government to know what those fortunes actually consist of. That means a comprehensive and reliable asset registry, credible methods for valuing privately held companies, better links among property, corporate and financial databases, and the ability to identify the ultimate beneficial owners behind complex corporate structures. A listed share has a market price every trading day. A stake in a family-controlled shipping business, a private holding company or an investment vehicle can be a different matter. Determining its taxable value can involve assumptions about future profits, debt, ownership rights and comparable transactions. Each assumption creates room for disagreement - and potentially litigation.
There is also the question of mobility. Wealthy individuals generally have more options than salaried workers or small-business owners when tax rules change. They can restructure holdings, alter their tax residence or move assets and investment activity across borders. That doesn’t make taxing them impossible, but it raises the cost of getting the design wrong.
Greece faces an additional contradiction. While politicians debate asking more from the wealthiest households, the country has spent recent years constructing incentives designed to persuade precisely those households to move capital - and in some cases themselves - to Greece.
Among them is the country’s “non-dom” regime, which offers favorable tax treatment to qualifying wealthy individuals who transfer their tax residence to Greece. Greece has also encouraged the development of family offices, the specialized structures through which affluent families organize investments, assets and succession planning.
That creates an uncomfortable policy question. If Athens wants to tax large fortunes more aggressively while promising no additional burden on smaller businesses, what happens to the preferential regimes already offered to wealthy residents and investors?
Any credible answer would have to go beyond headline tax rates. It would require greater transparency over beneficial ownership, tougher scrutiny of transactions between related companies, and effective taxation of dividends and capital gains. It would also require policymakers to examine whether existing incentives have created a two-speed tax system in which internationally mobile wealth receives treatment unavailable to ordinary businesses and households.
There is a broader economic trade-off. Greece spent much of the past decade trying to restore its reputation as a destination for capital after the sovereign-debt crisis devastated investment and sent businesses and skilled workers abroad. A poorly designed wealth tax could undermine those efforts. An excessively generous system of exemptions, however, risks leaving governments dependent on taxpayers whose wages, businesses and property cannot easily cross borders.
That is why California matters to Greece even though the two economies could hardly be more different. The California experiment is testing not simply whether voters want billionaires to pay more - a proposition that can be politically attractive - but whether governments can identify, value and tax enormous concentrations of private wealth without encouraging avoidance, relocation or years of litigation.
For Tsipras, the politics are straightforward: protect smaller businesses and move the burden upward. The economics are harder.
The real dividing line in the coming debate may therefore be less about whether the rich should pay more than about what governments mean by “rich.” Taxing a successful professional, a profitable medium-size company or an expensive home is administratively easy. Taxing a billionaire whose fortune sits inside private companies, holding structures and assets spanning several jurisdictions is something else entirely.
For Greece, that distinction is crucial. If policymakers promise to shield the middle class and small businesses while raising substantially more from the very wealthy, they will have to build a tax system capable of reaching wealth that is both complex and mobile. Otherwise, the people with the fewest opportunities to rearrange their financial affairs could once again prove the easiest people to tax.
The battle over taxing the rich, from Athens to California, is ultimately a battle over that asymmetry: The larger the fortune, the more sophisticated the options for protecting it. The challenge for governments is to close that gap without closing the door to investment.
