This is a question raised at the Tax Justice Network conference yesterday, largely as it is an issue that is the focus of much of the work of Tax Justice UK. I am an adviser to Tax Justice UK.
The debate was in one part technical, focusing on whether we can tax wealth. The slightly frustrating element of the discussion on this issue was the failure to focus on why this is now possible, which is entirely down to the existence of automatic information exchange from the world's tax havens to the world's major countries. This process, which has only just begun, but which is already proving to have a real impact on tax collection rates from those using such places, is key to wealth taxation. Before automatic information exchange existed the possibility that wealth taxation could simply be evaded by relocating assets to tax havens was so significant that any proposal was undermined by it, and now it is not. Boltholes for wealth are now disappearing.
In that case the argument for or against wealth taxation is very much more about political will now. Helen Miller from the Institute for Fiscal Studies did, whether she intended it or not, present the case against that political will being created. I admit I found her arguments frustrating. To pretend that we cannot tax wealth is now wrong, for reasons I note above. And to suggest that it may be wrong in some instances to tax wealth because it is, as she suggested, just a second tax on labour where the benefit of consumption have simply been deferred is grossly inaccurate given the heavily skewed distribution of wealth within our society, plus the fact that the vast majority of the savings income of the vast majority of people in this country ( I use the term twice deliberately) has been exempted from any taxation by the simple expedient of exempting the first £1,000 of savings income from all tax liability in the UK, which should then have ended the need for ISAs, which did not happen.
So do we need a wealth tax? Some of the very wealthiest in the USA say that we do, although I am not sure that I agree with all their reasoning which certainly conflicts with modern monetary theory.
I also do so. I explained how this could be done through the income tax and NIC systems here, a while ago.
But we could also align income tax and CGT rates, as Nigel Lawson did in the 80s.
And we could substantially abolish the observed capital gains tax annual allowance which is a peculiar feature of the UK tax system in the sense that few other countries replicate it, but which provides those with wealth with the absurd entitlement to what is, in effect, a second personal allowance which is denied to those who have to work for a living. The injustice of the UK tax system and its inherent bias is obvious.
That is also the case when the absurdity of capital gains not being charged on death is considered: many of the problems with inheritance tax could be addressed if this exemption was removed, including on houses unless passed to a surviving partner or carer.
But so too is it by another simple fact. Over 80% of UK personal wealth is made up of tax incentivised assets, either in the form of people's homes or pension funds or ISAs. That is a staggering fact that makes clear it is the UK tax system that does help create the wealth inequality that we suffer in this country. In that case to tax the resulting imbalances in society makes complete sense.
I am not saying we need start with a tax on wealth as such, although I see little reason why we should not on the wealth of the top 0.1%, with the sole justification being that they are exceptionally wealthy and that the imbalance this creates society requires redress for no other reason than that. We should start by addressing the issues I note in my paper, here, and those other obvious issues relating to capital gains tax noted above. We can have seriously big impact doing these things before ever getting near the politically charged case of inheritance tax.
The time for wealth tax reform has arrived.
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Wealth for most people is savings. Savings is money earned through work where tax is paid at source. Savings are held in deposit accounts typically where tax is paid on interest. And now you want to tax the actual level of savings???.. on top of this the savings are taxed upon death.
Bit excessive and why bother saving is the obvious question.
Your comment is ridiculous, because it does not reflect what I said.
I noted that the first £1000 of savings income in the UK is now exempt from tax. This means that people who have funds on deposit accounts could have up to £100,000 in the present and still pay no tax on it. And very few people in the UK are in that situation.
Second, I only suggested a wealth tax on 0.1% of the population.
And third you therefore simply made up your comment, clearly having not bothered to read my post.
Why waste time doing that?
Peter says:
Savings is money earned through work where tax is paid at source.
Yeah right. If that were the case the neoliberal bleatings about tax might be justified. For the most part the vast sums of savings of the obscenely wealthy are not resultant on any work having been done. They are the result of rentier activity and speculation much of it based ultimately on the value of land which was variously stolen, often generations ago.
You’re doing the standard stupid thing of assuming that what is good for very wealthy people applies also to ordinarily solvent folk who for the most part indeed DO work for their living and some also manage to prudently save a bit. Margaret Thatcher was a past master at persuading ‘ordinary’ people on ordinary incomes that when she spoke of future wealth and opportunity she was talking to them. She wasn’t. She was hoodwinking them. Many people bought the lie and still believe it. They are waiting for the pay-off even though she died six years ago and was out of office for a long time before that. Without the government interventions in the aftermath of the GFC of 2018 most would be in queer street clinging to the remnants of their worthless assets.
Sadly that didn’t happen. Not because I wish these people ill, but because until they realise the extreme fragility of their financial security the political mood and direction in the UK is unlikely to change one iota for the better.
As you say removing the unfair tax breaks for the wealthy would be a start. Treat income from capital or inheritance like any other income. No additional tax free allowances. I do not buy the pensions is just deferred income as those on lower income do not have this luxury. If you want the luxury of saving you should have to compensate those that are denied income by that choice via taxation.
The tax system used to have a category called ‘unearned income’, which meant you hadn’t actually worked for it. It was in effect money earned as a result of ‘rent’.
I think that is category that should be revived – should be psychologically effective as well .
Indeed it did….more than one
It’s “just a second tax on labour” says a rep from the IFS. Oh, really? Full Fact checked Oxfam’s claim of 2016 that “The richest one percent of the UK population own more than 20 times more wealth than the poorest 20 percent combined” and found that a Credit Suisse analysis suggested it was more like 29 times. Even this may be an underestimate given the difficulty of finding out how much wealth the 1% own.
But whether it’s 29, 20 or just a measly 10 times the poorest 20% I’d like to know what kind of labour(ing) produces that amount of wealth.
Maybe the IFS is just fine with that kind of inequality, but a lot of are not and if taxation is one way of redistributing it to the poorest then that’s fine with me. However, we need to go further, as suggested, and prevent people accumulating that kind of obscene wealth in the first place. “Confiscatory” tax rates on income in the 50’s and 60’s (high 80’s and 90’s %) are held by some to have helped reduce the temptation to award very high rates of pay at the top. If behaviour cannot be influenced by argument and appeals to social responsibility then we need to start moving towards much higher taxation on wealth, not fleabites. (imho)
That 80% figure for wealth held in tax exempt assets seems odd. Can you give a source please? I am doing a project for my college in Afghanistan on wealth and I would like to quote reliable figures
ONS wealth data series 5
I think there is another important reason why we should tax excessive wealth. The political turmoil we are in is, to a large extent, due to the fact that too many of the 0.1% (Bezos, Koch, Mercer, Murdoch, Putin, Mohammad bin Salman, Soros, etc) spend their wealth on fighting an ideological war via media and think tanks instead of investing their wealth into solving the problems (inequality, climate change, land degradation, ocean acidification, mass extinction, declining biodiversity, population growth, etc) we have.
Since the 0.1% do not seem to be willing to tackle the problems, since, on the contrary, they are spending their wealth on preventing us from tackling these problems (take Brexit as an example), it seems imperative to empower the democratic state and taxing excessive wealth seems one of the reasonable ways to proceed with this.
Is this a point of view that is discussed at the Tax Justice Network?
I do nit think TJN believes the wealthy should have their freedom of speech restricted
So does the TNJ believe that a wealth tax is in conflict with the right to freedom of speech?
No
But it should not be intended to stop it
We should tax wealth if only because if we do not, it ends up being used to unfairly influence the political system in favour of those with wealth.
The evidence of that is uncontrovertible folks!
I am happy to agree with that
The intention is not stop freedom of speech. In fact, media don’t speak, they only multiply or propagate speech. Do you think that a system in which the multiplication and propagation of speech is in the hands of only a few individuals is compatible with democracy?
No
But wealth taxation will not change that
Regulation will
You and your idiot followers focus is on inherited wealth. How about the boy done good who set up a business, employs loads of staff paying PAYE and NI and his only wealth is in his trading business he has created?
Not inherited, not land, just hard work. Why should he compensate you lazy liberal bastards who do nothing bar collect your GIRO cheque?
Let me ask you a simple question John
When did you last see a Giuro cheque?
WHat else might also be wrong with your analysis if you cannot say?
What makes you believe that regulation is easier to achieve than wealth taxation?
I am not saying it will be
But unless you’re suggesting 100% wealth taxation of those who want to own the media then wealth taxation most certainly will not work
Are you doing that?
And why?
[…] By Richard Murphy, a chartered accountant and a political economist. He has been described by the Guardian newspaper as an “anti-poverty campaigner and tax expert”. He is Professor of Practice in International Political Economy at City University, London and Director of Tax Research UK. He is a non-executive director of Cambridge Econometrics. He is a member of the Progressive Economy Forum. Originally published at Tax Research UK […]
[…] By Richard Murphy, a chartered accountant and a political economist. He has been described by the Guardian newspaper as an “anti-poverty campaigner and tax expert”. He is Professor of Practice in International Political Economy at City University, London and Director of Tax Research UK. He is a non-executive director of Cambridge Econometrics. He is a member of the Progressive Economy Forum. Originally published at Tax Research UK […]
[…] By Richard Murphy, a chartered accountant and a political economist. He has been described by the Guardian newspaper as an “anti-poverty campaigner and tax expert”. He is Professor of Practice in International Political Economy at City University, London and Director of Tax Research UK. He is a non-executive director of Cambridge Econometrics. He is a member of the Progressive Economy Forum. Originally published at Tax Research UK […]
[…] By Richard Murphy, a chartered accountant and a political economist. He has been described by the Guardian newspaper as an “anti-poverty campaigner and tax expert”. He is Professor of Practice in International Political Economy at City University, London and Director of Tax Research UK. He is a non-executive director of Cambridge Econometrics. He is a member of the Progressive Economy Forum. Originally published at Tax Research UK […]