Forcing the Rich to Bail Out Europe
To many in Europe, the Continent has two big economic problems: Huge debt, and high inequality between the rich and the rest.
Now some politicians are advocating a plan to solve both.
The idea, first floated by a German economic policy group, calls for imposing a 10 percent tax on the wealth of the richest Europeans and forcing them to lend money to their governments.
The plan calls for placing a one-time 10 percent levy on the total assets for those with more than $309,000 in assets (or couples with more than $611,000). In addition, it calls for a “forced loan” program, in which the wealthy lend money to their governments that could be paid back over time.
Stefan Bach of the prestigious the German Institute for Economic Research (DIW) in Berlin, which floated the plan, said that: "In many countries the sovereign debt levels have increased considerably, and at the same time we also have very high amounts of private assets that, taken together, considerably exceed the total national debts of all [euro-zone] countries."
In other words, the wealth of the wealthy is more than enough to plug government budget holes.
The idea gaining popularity among European politicians. An Austrian member of the European Parliament, Jörg Leichtfried, favors the plan for forced loans, saying the rich could lend to the states at low interest rates. The loans, he said, would not be an “expropriation,” since they would be paid back. The head of Austria’s Social Democratic Group also backs the plan, saying states need to fix their budget troubles.
Yet others are opposed. Austria’s Finance Minister said the plan would chase the wealthy to other countries. France is already seeing a flight of the millionaires ahead of its plan to impose a 75 percent top tax rate on those making more than a million euros a year.
There is also a problem with the logistics of any wealth tax. Determining people's real earnings has proven hard enough for tax officials in Europe. Determing the value of their assets and wealth — from homes and private business to art and boats — is even harder.
Still, the combined issues of inequality and fiscal crises are likely to lead to more calls for the rich to bail out governments.
Do you think think the “forced loan” program would work in Europe?
-By CNBC's Robert Frank
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