As The Guardian noted last night:
The UK government's response to the coronavirus and the dramatic rise in public borrowing during the crisis should include a wealth tax on the richest in society, a former head of the civil service has said.
Sir Gus O'Donnell, who served as cabinet secretary under David Cameron, Gordon Brown and Tony Blair, said the Conservative government could prove it was serious about fighting inequality and levelling-up Britain by increasing taxes on wealth.
GOD (as he was inevitably known in the civil service) makes an important point about symbolism and a direction of travel. A wealth tax is an important element in the long term fight against inequality, which is increasing, and more because of the impact of quantitative easing than anything else.
The Guardian also notes:
John McDonnell, a former shadow chancellor, and Richard Murphy, a UK tax expert, have previously made the case for increasing taxes on wealth as part of the response to Covid-19.
According to polling by YouGov, 61% of the public support a wealth tax for individuals with assets worth more than £750,000, excluding pensions and the value of their main home.
I have made that point. But I have also made the point that UK wealth is, according to the ONS distributed like this:
Once private property wealth and pensions are taken out of account something like 75% of wealth falls out of the tax base on this basis. Of the remaining wealth, physical wealth (from cars onwards) will be hard to tax. That leaves financial wealth outside pension funds, and of that £1.6 trillion some £700 billion is ISAs, and they are going to be hard to tax. So we're down to a tax base of £900 billion at best.
I am not saying a 1% tax on that would be inappropriate: I am saying it will not rock the boat or really tackle the issue of wealth inequality, but some boat rocking is required.
In that case my alternative argument that we must instead focus on taxing the income from wealth a great deal more equitably is more important if we are to achieve real change through taxation to address wealth inequality.
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The Tories are more likely to increase VAT aren’t they really under the banner of ‘being fair’ (how we laughed).
When the architects of New Labour said (I paraphrase heavily and inaccurately but I don’t care) that they were very relaxed about people getting rich, did they not consider that as they facilitated that, that the wealth accumulated (and somewhat under taxed) would be used against them and their party? That the wealth accrued would then seek to consolidate its position?
They seemed to have the same attitude to banking regulation – let them get on with making money – it doesn’t matter how.
It was all about this blind faith in markets and that somehow they would be rewarded with everlasting power if they just looked away.
How foolish and naive.
I don’t for a second believe the Tories are in any way “levelling up” – it’s just a populist slogan. If they were, they could start by reversing the real terms fall, to say nothing of the actual cuts, to public sector pay of the last ten years.
Having (not before time) just finished Piketty’s magnum opus, the last few sentences of Capital in the Twenty-First Century seem very apt here. “Yet it seems to me that all social scientists, all journalists and commentators, all activists in the unions and in politics of whatever stripe, and especially all citizens should take a serious interest in money, its measurement, the facts surrounding it, and its history. Those who have a lot of it never fail to defend their interests. Refusing to deal with numbers rarely serves the interests of the least well-off,”
True
Although he does not get MMT….as far as I can see
You’re right Richard, Piketty has some old-fashioned opinions on public debt. His book was written a while ago now – maybe he has changed his views? I would hope so.
I have seen no sign of it
Gosh. £10 trillion. Almost the same as that reported (from 96 countries) through CRS. Interesting to get it in proportion.
Leaving pensions to one side, why are we leaving properly wealth and physical assets (Ferraris, jewellery, artworks, fine wines, gold bullion, etc) out of the mix?
For example income from property is already taxed at marginal rates. But the gains have their own special lower rates.
Why? Because valuation will be a nightmare and I suspect HMRC will not want to go there
Second proprietary will be in scope – but the sums involved will not racially change my conclusion
There are simply better ways to do this as yet
We know there has to be some redemption of government created currency to foster demand for it. In other words it’s a two-part process or system. (Most voters in the UK still ignorantly believe taxation and borrowing funds government spending.) What is clearly important is getting voters to understand this redemption process and consequently look at the net amount of money (income) that flows into their bank accounts and how equitable this is. They must also be taught to understand that what also matters is deciding what proportion of real resources proportionately should be allocated to meeting private and communal need. Regrettably there is no movement by enough of the country’s politicians to recognise these things. The country will continue to drown unless there’s any momentum here.
“What is clearly important is getting voters to understand this redemption process and consequently look at the net amount of money (income) that flows into their bank accounts and how equitable this is. They must also be taught to understand that what also matters is deciding what proportion of real resources proportionately should be allocated to meeting private and communal need.”
I wholeheartedly agree. And very succinctly said.
One of the great economic commentators of our times turned 90 this week:
He is on record as saying “You can only confiscate the wealth that exists at a given moment. You cannot confiscate future wealth and that future wealth is less likely to be produced when people see that it is going to be confiscated”
1) It’s odd that you don’t say who
2) That person does not understand entrepreneurs, who do not put tax into their thinking – those who do are managers and they are utterly different
3) You assume all wealth is created by effort – and I can assure you it us not
At 90 S/he has a lot to learn
Spot on Richard
https://www.aei.org/carpe-diem/thomas-sowell-on-the-fallacy-of-redistribution/
That’s pathetic – it assumes a wealth tax is confiscation
Oh dear….
Isn’t he the Lord GOD?
Yes….
Richard
I don’t see how just focusing on the income from wealth, rather than the stock, would change the situation in the way that you want.
Incomes from private pensions, from financial wealth and from property rented out to others, are already taxed.
For the reasons that you state, HMRC is not going to get into the business of assessing the notional “income” from ownership of Ferraris and the like.
So in practice you are left with owner-occupied property, which clearly does benefit the occupiers, but where we don’t at the moment recognise a flow of income. Even putting the politics to one side (try getting the tax on hardworking homeowners past the Daily Mail), I don’t see how it would be easier to get HMRC to start calculating and taxing millions of notional “incomes” from owner occupation, than it would be to identify wealth…
Why not read what I have suggested?
http://taxresearch.org.uk/Wiki/2020/05/11/tax-after-coronavirus-tacs/#paragraph5
Increasing the tax on income from wealth is really not hard – especially when it is so low now
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