Debate over the adequacy of tax contributions from billionaires has intensified following the release of a recent book by Professor Gabriel Zucman, a noted economist. Titled *We Need To Tax Billionaires*, the book draws on findings from a 2024 G20-commissioned report and argues for enhanced taxation measures targeting individuals with extreme wealth.
Zucman’s research highlights a significant discrepancy between the overall tax burdens borne by societies and the relatively low effective tax rates paid by billionaires. In France and several European countries, the general tax-to-national-income ratio hovers around 51%, while billionaires reportedly pay only about 25% of their income in taxes. Of particular concern is the average income tax rate for billionaires, which Zucman estimates at just 2%. This is contrasted with the United States, where the overall tax-to-national-income ratio averages around 30%, influenced in part by the private funding of healthcare and pensions by citizens.
The economist attributes this disparity to sophisticated tax planning strategies. Wealthy individuals often establish personal holding companies that receive dividends from their profitable enterprises. These billionaires typically draw minimal salaries to reduce taxable income, while reinvesting most gains through these entities. Consequently, the salaries subject to income tax represent only a small fraction of their true earnings.
Zucman’s central argument is rooted in a moral perspective: billionaires benefit substantially from public infrastructure, education, healthcare, and security services funded by society, which have supported their success. Therefore, he proposes an annual wealth tax designed to supplement income taxes and target individuals with net worth exceeding $100 million. This tax would amount to 2% of total wealth annually and, according to his estimates, could generate between $300 billion and $380 billion in global revenues each year.
To improve compliance, Zucman advocates for enhanced international cooperation, including automatic exchange of banking information between tax authorities. To address concerns over tax avoidance through migration, he suggests taxing citizens based on their residency history, with tax obligations gradually declining over time after leaving a country.
The application of this wealth tax to start-up companies, particularly those with limited profits or cash reserves, is considered manageable through mechanisms like share sales, issuing shares as payment, or employee stock issuance.
Valuation of wealth is a critical aspect of enforcement. Zucman notes that about half of billionaire wealth is tied up in publicly traded shares, which are easier to value. For privately held businesses, tax authorities could use industry-specific valuation methods based on profits, assets, or sales. Enhanced beneficial ownership reporting would further assist authorities in tracking wealth.
Israel has taken early steps consistent with some of these ideas. Since 2025, the country has applied a “trapped profits” tax imposing a 2% levy on prior-year accumulated profits of closely held companies above a threshold of approximately $250,000 (NIS 750,000). This threshold is notably lower than the $100 million benchmark proposed by Zucman. The surtax is avoidable if companies distribute taxed dividends or reinvest profits in qualifying assets. Additionally, the Israeli system may attribute certain current profits from “labor-intensive” activities directly to shareholders, where they can be taxed at rates up to 50%, subject to specific conditions.
Despite these measures, tax experts caution that enforcement remains complex. As legislation evolves, taxpayers often develop new strategies to minimize liability. Questions remain about thresholds for family groups, potential double taxation for immigrants, and cross-border enforcement.
Advisers emphasize the importance of early consultation with tax professionals familiar with relevant jurisdictional nuances to navigate this shifting landscape effectively.