The Guardian has an editorial today that says a wealth tax is ‘necessary but insufficient' as a basis for tackling inequality in the UK. They say:
Before Covid-19 we were seeing a steady appropriation of wealth by a rentier class, who live off the income generated by dividends and rents. The scarcer capital is, the more this group wields disproportionate influence. In any coronavirus-induced recession, they will be looking to protect extractive mechanisms that delivered a record £111bn in dividends from UK companieslast year. That is money which could have been used for corporate investment, leading to better-paid jobs.
The situation is worse than they suggest: research I have done with others suggests that many of these companies can only now survive with state support. And the likelihood is that the rentiers will get that support.
The Guardian also notes:
The economist Thomas Piketty estimated that half of all UK private wealth is inherited rather than earned. A wealth tax is necessary but not sufficient. The political priority is to help working people build up savings. To level up Britain, there will have to be higher wages from labour and also policies that lead, in the words of John Maynard Keynes, to the (metaphorical) “euthanasia of the rentier” so that the intelligence, skill and determination of the entrepreneur can be “harnessed to the service of the community on reasonable terms of reward”.
The point is well made: the foundations of wealth are work and enterprise, and current business policy and the maintenance of the status of existing wealth oppress both. I stress, there is nothing whatsoever entrepreneurial about current policies on wealth, most of which erect barriers to entry for new companies.
In that case, there is a need to tackle wealth through taxation. The only question is whether a wealth tax is the first item on the agenda. I will state again that I do not think it should be: increasing existing taxes on the income from wealth is in the current environment quicker, more cost-effective, will be subject to less resistance and will deliver what is required whilst plans for a wealth tax are developed. There is much more on this here. Being too blinkered on this issue and thinking that a wealth tax alone will solve it is unwise: we need to think broadly about this issue, which is one of the biggest that we face in our society.
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Richard, my assumption is that reduced taxes on capital gains, dividend payments, corporation tax, are designed to “reward” or stimulate investment. Is there evidence that this was necessary, at some point?
No….
Agree that taxing income on wealth at a higher rate than income from work would be an improvement.
But council tax which is a poorly calculated wealth tax is a significant current issue, especially as regards regional inequality. Value every property in the UK and tax them as a percentage of current value, then redistribute on per person basis.
What you are leaving out of the equation Charles is that the value of homes has been artificially inflated over the last five decades in the UK by corrupt Conservative and Labour governments who’ve turned a blind eye to private sector bankers manipulating house mortgage under-writing standards and politicians of these parties slashing the affordable homes building programme. This blind-eye was motivated by a mixture of monetary system ignorance and greed.
The ratio of the average house cost to average annual gross income between 1970 and 2019 has nearly doubled. Of course, there will be those who say this is a product of more women moving into the labour market over this period to which my response would be really so that they can provide bankers with more profit given that 80% of bank loans are for house mortgages!
What I argue is beautifully exemplified by Tony Blair’s private behaviour which made him and other MP’s diffident in supporting a massive increase in spending on creating affordable homes because they were personally benefitting from Buy-To-Let house price hyper-inflation:-
http://www.theguardian.com/money/2016/mar/14/tony-cherie-blair-property-empire-worth-estimated-27m-pounds
https://webarchive.nationalarchives.gov.uk/+/http://www.hm-treasury.gov.uk/barker_review_of_housing_supply_recommendations.htm
https://www.insidehousing.co.uk/home/home/labours-legacy-19459
Agree that increasing taxes on income from wealth make most sense; others smack of a one-off windfall type tax that simply polarises arguments. Entrepreneurs relief, VCT and perhaps EIS could go. I think there is some evidence that EIS can be a positive, but I suspect that just like R&D relief it misses the intent in the majority of cases.
Leveling up taxes makes more sense to me and can be explained more easily.
Council tax bands could be extended ? Can’t see that affecting poor widows in large houses as I doubt there are many living in property that might be affected. Some of the bigger earners might even like living in a band Z house – a sign that they have ‘arrived’…
Council tax can always be rolled up until death…..
Council taxes aren’t like other taxes,are they? This is real money that councils are collecting from their residents and then spending in that community. Income taxes etc are just collected and cancelled out of the system so they no longer exist.