A Nobel-prize winning economist says the wealthy will just find a way to dodge any wealth tax

insider@insider.com (Juliana Kaplan) 

© Provided by Business Insider British-born economist Angus Deaton of Princeton University answers questions in a news conference after winning the 2015 economics Nobel Prize in Princeton, New Jersey, October 12, 2015. REUTERS/Dominick Reuter

Nobel Prize-winning economist Angus Deaton said a one-off wealth tax is a "bad" way to pay for the pandemic.

Without addressing its morality, Deaton told Bloomberg it would be hard to implement and the rich would avoid it.

One-off wealth taxes have been gaining traction recently, and even the IMF has endorsed them.

Wealth taxes have become an increasingly prominent topic as inequality surges in the wake of the coronavirus pandemic, when the world's billionaires tacked $4 billion onto their net worths while 54 million people fell out of the global middle class.

One possible solution, touted by everyone from an Oxfam report on inequality to the International Monetary Fund to Sen. Elizabeth Warren: A tax on the wealthiest members of society.

But a Nobel Prize-winning economist famous for his work on inequality has raised concerns about using a wealth tax to pay off pandemic costs. The problem: He thinks the wealthy will try to dodge it.

In an interview with Bloomberg, Angus Deaton said wealth taxes would not only be difficult to implement, but would give the ultrawealthy incentives to avoid it. "And avoid it they will," he said.

Billionaire Leon Cooperman said as much in an interview with CNBC while discussing Warren's proposed wealth tax. "If the wealth tax passes, go out and buy yourself some gold because people are going to rush to find ways of hiding their wealth," Cooperman told CNBC.

Concerns over implementation have been a major talking point in wealth tax discussions. Another is the myriad ways that the ultrawealthy use to hide their wealth and assets from taxation.

A recent study from the IRS and economists found that America's richest seem to have been hiding billions from the agency. The US, where Warren has been continually pushing for a more permanent wealth tax to address inequality, has become a leading tax haven for the world's richest.

One-off wealth taxes have gained traction recently

Deaton is a famed scholar of inequality. As Bloomberg reports, he's currently leading an expert panel in the UK that's aimed at reducing inequality. In December, another panel in the UK - the Wealth Tax Commission - recommended a one-off tax on the UK's wealthiest residents. They said that a a 1% tax for five years on individual wealth over £500,000 could raise £260 billion (around $357 billion).

The IMF recently recommended one-off wealth taxes as a way to help improve the global rebound; one such tax has already been implemented in Argentina.

Deaton said that if implemented, any one-off wealth tax would likely become permanent. He also cautioned against cutting social services in the UK, pointing to the negative impacts of austerity after the financial crisis. He declined to comment further to Insider.

In the US, President Joe Biden hasn't seemed to favor an explicit wealth tax, although he's currently trying to increase the tax rate for corporations and has said taxes will go up for the $400,000 and above income bracket.

"I'm not trying to punish anybody, but damn it, maybe it's because I come from a middle-class neighborhood, I'm sick and tired of ordinary people being fleeced," he said in a speech defending his proposal to increase the corporate tax rate to 28%.