The latest video is out:
The data I quote comes from the Office for National Statistics.
My message is simple: wealth taxes are not politically easy and there are better ways to tax those with wealth more, at least in the short term.
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Thanks Richard, that was very clear and helpful.
Thanks
That was superb Richard. Really well paced and very clearly put across. You are getting good at this.
Thanks
It is a learning process, without a doubt
It seems the classical approach of “there is a need. how should it be funded?” has been lost. It’s been replaced by “look at all that money! how can we take it?” Just a thought, but if the need pre-exists, then it’s much easier to determine a justifiable means. AND punishing the successful sounds counterproductive.
Many thanks for a very welcome dose of realism (political as well as economic) as an antidote to all the currently fashionable fact-free burbling about wealth taxes.
One obvious way to tap the property market’s accumulation of billions in unearned wealth, and at the same stem the tide of growing inter-generational inequality, would surely be to shift the tax burden from purchases (stamp duty) to sales. I have never understood why some element of CGT is not levied on all those unearned windfalls when people sell their main residences at a huge profit on the original purchase price. Obviously difficult to sell politically, but nobody could dispute the unanswerable fairness of taxing such unearned/’undeserved’ wealth. I wonder how much would be generated each year if ALL residential property sales were taxed at (say) a flat rate of 20%.
Keep up the good work!
I meant a flat rate of 20% on the capital gain, natch…
I’m one of those whose sense has been that a wealth tax might be a good idea. We seem to tax work and the expenditures that go with living, while wealth gets a free ride. But some interesting points here.
Nevertheless the argument seems to come down to two points: the difficulty of collection and, (when you have given up on any collection that looks at all difficult), the fact that the amount raised would be small.
It seems to me the first point would also apply to a land tax (to which I have also been sympathetic), and so you come back to taxing work and living again, and this has a consequence because, by not taxing assets, you end up inflating their values. So you add to inequality, and you make social mobility that much more difficult. There is no true social mobility if asset prices are so high that a young person cannot hope to have a nice house no matter how hard they study and work, without family help. The result is some way social democracy (and also one might perhaps add from Thatcherism).
Clearly if there would be collection difficulties then those need to be addressed. It seems to me they could be met quite straightforwardly with options for payment to be deferred until such time as there is cash to pay. We do this already in relation to capital gains, as Richard will know, with holdover and rollover reliefs. This would not be entirely new territory. So why not? Why not tax, but allow deferment of payment?
I’d add one further thing, which is in relation to MMT. I’m slightly reluctant to criticise, but it seems to me there’s an issue with MMT. If the point of tax is to control inflation, then deferred taxes don’t look a great help because they don’t take out demand (or do so only at some uncertain point in the future). The point is always likely to be to apply taxes that do take out demand (and so control inflation) and unfortunately it looks to me that purchase taxes (like VAT) and income taxes will always do that best. So assets and wealth are always likely to get a free ride.
We’ve seen a lot asset price inflation in the last 10 years. It’s been fed by QE. If MMT isn’t careful it seems to me it becomes a recipe for further asset price growth, further inequality and decreasing social mobility.
Not expecting Richard to agree, but will be interested to see his response.
I am arguing for more taxes on wealth – just not wealth taxes
And your assessment of MMT and tax is wholly wrong https://www.cambridge.org/core/journals/social-policy-and-society/article/modern-monetary-theory-and-the-changing-role-of-tax-in-society/B7A8B0C7C80C8F7E38D20BE4F5099C83
I’m not sure you are arguing for more tax on wealth – at least not here – in fact rather the reverse. More tax on investment income and on capital gains perhaps, but not on wealth per se.
The thrust of the video was that taxing wealth was too difficult. My suggestion was that you could still tax wealth if you allowed that payment could be deferred.
As for my assessment of MMT and tax, I wouldn’t pretend to be fluent in MMT. I’m also well aware that part of the attraction of MMT is that it seems to make possible things which the old tax and spend paradigm never seemed to allow. I share that attraction.
But there is surely a distinction between MMT as simply a description of how things work – the narrow theory -, and the MMT as something which is really rather more than that – a social and environmental programme paid for by the creation of additional money. The former may make the latter possible, but the latter does not necessarily follow from it.
As for tax, for the reasons I gave, my sense is that the narrow theory could in fact give a logic to quite regressive taxation policies, and these would have to be resisted.
I am a pragmatist
And I am not into gestures
I want to reduce the available spending of the wealthy – and what I am suggesting does that. If you claim otherwise I am not sure how. Deferring tax definitely will not. That’s just an invitation to avoid. We have enough of that.
And re MMT, it says we need no overall new net tax now and I agree. but it allow for redistribution and we definitely need that
MMT makes such decision possibilities clearer – and is the exact opposite of way you are suggesting, which is wrong
About taxes and spending.
Spending and taxing are not simply opposites. In respect of the economy as a whole you can think of them like that. But they are also the tools you use to change and re-balance the economy. Where you place the taxes and spending in the economy matters too. So they are also co-operative – you use them together to re-shape the economy to be as you want it. To use the ubiquitous car analogy you can think of them as the controls that you use to steer and control the car where you want it to go. So they don’t just operate like the obvious brake and accelerator but like the steering wheel and the gear stick too. And in MMT you make those adjustments in order to achieve a particular ‘public purpose’ not just a financial objective. As ever in MMT you are always trying to achieve at least two purposes at the same time using tools that seem to be opposites but are also not opposites at the same time. MMT is never just about one thing.
I agree
See https://www.cambridge.org/core/journals/social-policy-and-society/article/modern-monetary-theory-and-the-changing-role-of-tax-in-society/B7A8B0C7C80C8F7E38D20BE4F5099C83
Interesting Richard as always, but can you speak a bit more clearly for those of us a little hard of hearing… 🙂
Noted
But I have slowed by normal pace deliberately for these
[…] am on record as saying that we do not need a wealth tax, but that we do need to reform taxes in wealth. This is the logic of the part of the Tax After […]