Nick Clegg wants to tax wealth. So do I. There's no other way to reduce wealth inequality in this country, and that wealth inequality is deeply destructive of community in the UK. That it so happens revenue can be raised a the same time is a bonus.
Clegg is wrong however if he thinks that a mansion tax (as Matthew Oakeshott is suggesting he's demanding) is going to address this issue. There is no doubt that Council Tax needs to be reformed, but a mansion tax would need a revaluation of vast numbers of properties simply to result in a tony number paying a small additional contribution. That's not efficient by by measure thought of.
If Clegg is serious he has to do three things. First, if we seriously tackled tax havens vastly more wealth would be found and be subject to income tax. This would create real tax justice.
Second, we could, of course, have a 50% tax rate, which the Lib Dems have just got rid of.
Third, we could stop income being sheltered in limited companies by taxing the profits of private companies as the personal income of their owners.
Fourth we could eliminate the abuse that having a capital gains tax rate ;less than the income tax rate permits.
Fifth, inheritance tax could be made to work. There are numerous ways to do this: cutting allowances would be a start.
Sixth, ending large numbers of tax reliefs that are solely designed to create loopholes for the wealthy would be of great value. So let's get rid of venture capital trusts, EIS, higher rate charity reliefs and so much more.
Now that's an agenda to ensure wealth and the income it gives rise to is taxed. Clegg has a long way to go.
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You might also reasonbaly add a proper and effective land value tax which has the dual benefit of being difficult to avoid and is fair. It also brings in the plethora of foreign landowners into the tax net – especially in Scotland where land holding remains feudal.
Why a 50% tax rate? Why not 48% or 60 %? And to whom should it apply?
And how do we know that such tax is fair – lets be frank, it is purely an arbitrary figure, applied to an arbitrary group of people and no reasoning or explanation to why such tax rates are actually fair.
Have you heard of democratic government Justin?
Do a little research and you might find it really quite interesting
Sorry Richard, but I do not think that Clegg is serious about this type of policy. He is trying to rehabiltate his leadership before the conference season. There is no way that the Tories would agree to this policy. Perhaps he is trying to make overtures to Labour. One thing is certain, never trust this man. The only truthful part of his interview relates to the breakdown of social cohesion and frankly the elites are not concerned about this.
So true on the trust point Teresa
We agree (more or less) with your six proposals.
But the first one, “tackling tax havens”, would have colossal outcomes which would directly benefit millions of people. Once this is done a new world ethos would prevail making your five other proposals easier to enact and possibly less punitive.
Tax havens (and the misery they cause) are the key — and only by dismantling them can we begin to advance. Start close at home and work outwards, from the City via the contemptible three islands operating close to home and then right across the globe.
The decision to introduce a higher rate of stamp duty for homes over £2million pounds, the much talked about threshold for the ‘mansion tax’ has led to a fall in the sale of homes in the top end bracket. The number of houses sold for more than £2million in March 2012 – the latest month for which the figures are available – dropped to 124 from 205 the previous year, the Land Registry said.
Read more: http://www.thisismoney.co.uk/money/mortgageshome/article-2167663/Land-Registry-Stamp-duty-hike-2m-homes-sees-40-sales-fall-house-prices-rise-May.html
So, if fewer houses are selling for £2million in areas where one would expect to see them sell for over £2million, does that not mean that the average house price in those areas, based on selling prices, could very easily go down, meaning fewer houses are valued at £2million or more? Meaning a huge number of people who’ve escaped the 50% income tax rate avoid the mansion tax too? If so, it might just be introducing the 7% stamp duty rate is-and perish the thought that anybody in The Treasury would be so cynical as to do this – a way of reducing the number of houses to which the mansion tax would apply.
The problem here is that stamp duty has stepped rates, rather than marginal rates. If you sell your house for £2m you pay 5% on the whole rate of the property (£100,000). If you sell your house for £2,000,001, you pay 7% on the whole £2m+1 = £140,000.07. This gives people incentives to sell at just below the threshold values, or to sell the property at a slightly reduced value, and the fixtures and fittings (which don’t attract stamp duty) at an inflated value.
The solution is that the tax should apply to the entire price paid for the transaction, including fixtures and fittings, and it should be computed like income tax, with the higher rate only applying to the amount above the threshold, giving no incentive to avoid particular ranges of prices as there would be no discontinuities in the tax paid. The actual marginal rates would have to change significantly, of course, to keep the total amounts paid at current levels.
A land value tax would make a lot more sense
Then it would not just apply to those moving
I would be very interested in your opinion of Michael Hudson’s stance on taxation. He believes that at the moment taxes are being pushed onto Labour and removed from the rentier classes. Land taxes according to him need to be increased and taxes on monoplies increased (I assume he is pointing at energy resources and things like railways).
My particular query was that he believes that increased land taxes would bring down house prices and put more tax burden on the rich. He thinks that removing taxes from labour would help growth and the poor. Do you agree with him? I have linked his blog here.
http://michael-hudson.com/
I think LVT has a real role to play – and taxes on property are too low so house prices are too high
I also think taxing monopoly profits (and that’s from patents too) is vital
So we’re in agreement to some degree
But I think he believes LVT can achieve more than I do
This is a quixotic move by Nick Clegg on so many levels.
Firstly, it’s like he’s only just realised that spending cuts are distributionally regressive. He wants a one-off wealth tax to avoid £10bn of social security cuts – certainly we shouldn’t be cutting social security, but what about the billions which have already been cut to benefits and tax credits, much of it falling on vulnerable families (as I showed in the recent report “In the Eye of the Storm” for NSPCC, Action for Children and the Children’s Society?) Why start caring about the distributional consequences of austerity now, after so much damage has already been done?
Secondly, the £10bn Osborne wants to cut from social security is £10bn per year. If the govt brought in a one-off wealth tax for £10bn it would delay the cuts for one year. And then what? Clearly a wealth tax would need to be a permanent annual measure if it’s going to pay for ongoing spending measures. Anything else is just posturing.
Thirdly, Clegg persists in the idea that Coalition tax policy is somehow “progressive” when the increase in the personal allowance to almost £10k – a policy which doesn’t benefit most non-workers or the very low paid in any case – was more than cancelled out by the hike in VAT to 20 percent, VAT being regressive as a proportion of current income. And also the biggest tax cut anyone’s got from the Coalition so far are people on over £150,000 a year who got a 5 percentage point cut in their marginal income tax rate. Very “progressive” I’m sure!
I don’t even understand this intervention by Clegg in terms of Lib Dem electoral strategy. How many people on the left are going to suddenly believe Clegg is a left-winger based on this statement, given all the other right-wing things the Lib Dems have done? All this is going to do is alienate what few (mainly centre-right) voters the Lib Dems have left. If anything it could boost the Tory vote as Lib Dems defect to the Tories. But maybe that is what Clegg actually wants to do in the long run? 🙁
I have very mixed feelings about progressive tax policies which result in more employed people paying no tax at all. Surely this will lead to the right arguing that no tax contribution means no entitlement. This is already being rehearsed in relation to young people’s benefits. I seem to recollect a recent suggestion that a national insurance record should be established before benefit can be claimed. An extreme rightwing government could also deny the vote to people who lack the ‘appropriate’ tax and national insurance record. Our democratic rights are constantly being eroded by the advance of corporate power and the current climate in which all benefit claimants are labelled ‘scroungers’ could result in a very authoritarian state.
I tend to agree
This is why I want very low starting rates – but do not think keeping people out of tax an objective, unlike, say the LibDems
The evidence is that people who don’t pay income tax don’t vote
So some small payment is desirable
Tax is the consideration between people and government after all
That means of course that you have to be paid sufficient to start with: so raise the minimum wage.
Or you could save all the cost and time consuming red tape and just get Mervyn King to print a few billion, but give it to the government directly to spend in areas, and on the issues that the country really requires, like the NHS, education and new jobs for the jobless.
You could also raise the tax free allowance to compensate the lower earners for the subsequent de-valuing of the Pound. A relatively cheap win, win situation.
“If Clegg is serious he has to do three things” – or even six! The more the better, I guess 🙂
Sorry – holiday editing is clearly no better than my normal editing
I have a thought experiment to propose here, I have not thought it through but I thought if anyone might subject it to rigorous scrutiny I might find them here.
It seems to me that in a recession, there isn’t actually any less money in the economy, but it just moves more slowly and as result people are less confident and so they spend less and save more etc etc. if the tax system could be targeted at money that is not moving quickly enough (e.g. savings) then would people might be more inclined to spend as quickly as they could (like they would during a high inflation period) so increasing the speed at which money circulates in the economy? People who didn’t want to spend as in “consume”would have the tax efficient option of investing in economically active things like businesses or pay tax on what money they have stagnating in their bank account. Overall effect of this would be to encourage economic activity and discourage economic stagnation? Anyone willing to think this through?
You’re reinventing Keynes
But it’s done by borrowing which counters the net saving
Bingo
This is a genuine question, not a dig at your left wing bloggers (a change I know).
How are Tax Havens going to be eliminated?Even if the UK abolishes its “own” havens, what prevents the mobile rich, corporate or private, moving to someone else’s Tax Haven?
Strikes me that the tax changes proposed hit the middle and upper middle classes. And the more elderly of those classes too. Plus the upwardly mobile lower middle class/ working class. These are the people who are more likely to vote by the way.
We have a lot of tax legislation already, one of the most complicated tax codes in the world- yet we still cannot enforce it.
Start here
Then come back for more if needed
http://www.pcs.org.uk/download.cfm?docid=864E6798-5F8C-4012-BC1E91C678691123
Taxing poverty is pointless, there’s only wealth remaining.
Or maybe this is the real future, the intended future, indentured by poverty:
http://www.testosteronepit.com/home/2012/8/29/the-pauperization-of-europe.html
I do have a great deal of time for your views. What I’m confused about (and I made a similar comment on Liberal Conspiracy site) is that you seem to be using income and wealth interchangeably. It seems to me that sensibly taxing wealth is very difficult. Taxing the income that wealth generates should be straightforward and – in my view at least – is what we should be aiming to do and we should be aiming to close (as you seem to be suggesting) the loopholes that allow the wealthy to avoid paying what might be regarded as a reasonable rate of tax on their income. Do you really think we should tax wealth, or are you really talking about taxing income (but doing so in a way that is more difficult to avoid).
I find that a very odd suggestion
I am suggesting that it is easier to tax income, for sure, than to tax wealth
But I really don’t think that means I am confusing the two
One is a derivative of the other with regard to rent seekers, after all
I wasn’t really making a suggestion, I was asking a question (that I don’t think you’ve really answered). I also wasn’t aiming to annoy or irritate you (which I assume I have, given that you seem to think a response saying that what I’ve supposedly suggested is very odd is a reasonable way to respond). The question was simply, do you think we should tax wealth (by which I mean the total), or are you suggesting that we should tax (properly) the income that wealth generates. The latter seems fairly obvious and certainly closing the loopholes that allow the wealthy to avoid much of this tax would be a good thing to do. Taxing wealth (as opposed to the income it generates) does seem – to me at least – a very difficult thing to do.
I apologise if you took offence: I was a little short without intention to irritate.
I intended to say firstly I did not think I had confused income and wealth and second that I agree: clearly income is easier to tax than wealth, odd exceptions like inheritance apart. That is why I was suggesting closing loopholes on income taxes first.
As a matter of fact wealth could not be taxed unless they are.