Danish premier bets on $1 billion wealth tax to keep her job

Prime Minister Mette Frederiksen is betting that a proposal to reinstate a wealth tax on Denmark’s richest residents will resonate with the Danish voter base and help keep her in power next month, even though critics say it might lead to an exodus of billionaires.

Frederiksen, a Social Democrat, said she aims to raise about $1 billion from a group of Danes, representing less than 1% of the population of 6 million, as she called a parliamentary ballot for March 24.

“A wealth tax will take the top off inequality and create a better balance for our country,” Frederiksen said on Thursday. She framed the measure as consistent with Denmark’s tradition of fairness, saying revenues would help fund priorities like smaller class sizes in schools.

Denmark had a wealth tax for nearly a century, with rates and thresholds changing many times. It was abolished in 1997 as part of broader tax reforms aimed at boosting investment. Almost half of voters want to reinstate it, according to a poll by Oxfam Danmark in early February, as a means to address widening disparity.

The country’s Gini coefficient has climbed by around six points over the past two decades, meaning income is less equally distributed, driven partly by soaring property prices and the strong performance of major companies controlled by some of Denmark’s richest families.

“For many Danes this is a new development, and it’s challenging the way they see themselves and the Danish society,” said Nanna Mik-Meyer, a professor at the Copenhagen Business School. “Center- and left-leaning parties like the Social Democrats have to address this.”

Around 22,000 Danes with fortunes exceeding 25 million kroner would be hit by a 0.5% tax, newspaper Borsen quoted Frederiksen as saying in an interview.

Among them are Kjeld Kirk Kristiansen from the family controlling toymaker Lego Group, Denmark’s richest with a net worth of $11.3 billion, according to the Bloomberg Billionaires Index, and Niels Louis-Hansen with $6 billion, who controls medical equipment maker Coloplast A/S, as well as Anders Holch Povlsen with $6.8 billion, owner of clothing company Bestseller A/S.

The proposal was swiftly rejected by right-wing opposition parties.

Foreign Minister Lars Lokke Rasmussen – leader of the Moderate party, a partner in the premier’s governing coalition – also dismissed a wealth tax as “a bad idea.”

“We are firmly opposed to it,” Rasmussen told local media after Frederiksen’s speech, citing the example of Norway.

A combined 105 wealthy Norwegians with fortunes exceeding 100 million Norwegian kroner ($10.5 million) left the country during 2022-2024, according to the Civita think-tank, after higher wealth and dividend taxes were introduced in the 2022 budget.

Otto Brons-Petersen, head of analysis at the liberal think tank CEPOS, added to the skepticism, saying “there’s a risk that people who are in the process of building up a fortune and developing their business might think twice, and consider moving abroad, deciding that Denmark isn’t their best base for this.”

The first threat has already been aired. Erling Daell, who together with his brother controls retailer Harald Nyborg, has said he will consider leaving Denmark and take his company with him if the proposal turns into a law, according to an interview with media Finans. The Daell family has a net worth of about 9.9 billion kroner, according to Okonomisk Ugebrev’s list of the wealthiest Danes.

Still, the Norwegian experience also offers political reassurance.

Prime Minister Jonas Gahr Store, a fellow Social Democrat who’s himself a millionaire, won another term in September elections after defending higher capital taxation, including an exit tax modeled on Denmark’s system. He has described those who left as having “breached the social contract” underpinning Norwegian society.

In Denmark, the debate is unfolding as debt-hit governments across the western world hone in on wealth taxes as a way to bolster fragile balance sheets, and amid broader shifts in European politics. The return of Donald Trump to the White House has rattled transatlantic relations and sharpened pressure on European governments to boost defense spending and strengthen public finances.

For center-left leaders such as Frederiksen, proposals targeting the ultra-wealthy reflect an effort to shore up support among traditional voters while navigating a more fragmented and polarized political landscape.

She signaled she’s open to either renewing a centrist, cross-bloc coalition, which includes Rasmussen’s party, or forming a more traditional, left-leaning government. The issue of a wealth tax could be a deciding factor in whether she and voters choose a left-leaning government over a broad-based coalition.