Tax Justice UK published this post yesterday. I am an adviser to Tax Justice UK and thought it worth sharing this.
I continue to stress, very strongly, that there is a case for increasing tax on the wealthy right now, but not for the sake of raising revenue overall, which would be a total economic mistake. The only reason for taxing wealth more is to redistribute in the interests of reducing inequality and reallocating funds to those with the highest marginal propensity to consume in a recession:
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The coronavirus lockdown saw Conservative voters shift in favour of higher taxes, according to our new report, “Talking Tax: How to win support for taxing wealth”. The report looks at attitudes on public spending, wealth and tax by Tax Justice UK.
​A change in mindset among Conservatives forms part of general public support for higher taxes that we uncovered. The research was done in collaboration with Survation and the University of Sheffield.
In the long run it's clear that Brits want fair tax rises to support better public services, tackle inequality and deal with the climate emergency. When you talk to people, there is no clamour for tax cuts. The middle of a recession is a bad time for broad brush tax rises, but higher taxes on the rich make sense and are popular.
Polling and focus groups carried out between the 2019 general election and the middle of lockdown also uncovered significant support for taxes on wealth, with 74% of people wanting to see wealth taxed more, including 64% of Conservative voters and 88% of Labour voters.
The proportion of Conservatives who said they were personally prepared to pay more tax to fund services went up from 41% to 46% between March and June. There was also strong Tory voter support for rumoured increases to capital gains, pension tax relief and corporation tax. Conservative support for higher corporation tax leaped from 61% in March to 74% in June.
The findings come as Chancellor, Rishi Sunak, mulls once in a generation changes to the way wealth is taxed ahead of the autumn budget.
Tax Justice UK used 11 focus groups and two major polls to test a number of policies under consideration by Mr Sunak. They include: taxing income from wealth at the same rate as income tax; reducing pension tax giveaways to higher earners and upping corporation tax. All measures were supported by a majority of the public. Conservative voter support for these measures was even higher than that of the general population.
The report also includes a shot across the bows amid speculation the government could cave in to US pressure against taxing digital giants like Amazon and Google.
It finds near universal anger with tax avoidance by corporations and the wealthy with 81% of people saying it is morally wrong for companies to avoid tax and 76% saying the same about tax avoidance by individuals.
The Trump administration is reported to reject a Brexit trade deal unless Boris Johnson drops the UK's 2% digital sales tax which aims to recoup some of the tax avoided by multinationals.
Tax Justice UK is calling on politicians to finally fix the way we tax big multinationals and not cave in to pressure water down the rules.
Download the full report here.
Download the March polling results here.
Download the June polling results here
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It’s an excellent piece of work.
Some positive trends on taxation and attitudes to paying for public services.
One depressing thing that stood out were the sections on inheritance tax and ‘bashing the rich’.
Inheritance tax is ‘deeply disliked’ and the majority of people in the UK still believe we live in a meritocracy and working hard is the most important thing for getting ahead, and the majority of people they spoke to were uncomfortable with aggressive language towards the wealthy.
The left really needs to absorb this and incorporate into every bit of their messaging.
I’m not sure that the majority view that you get what you deserve isn’t the biggest issue in society today, it underpins so many of the problems we face.
It’s also abundantly clear an enormous amount of work has to be done to increase the level of economic literacy in the general public.
Hi Richard,
Please can you provide additional insight/a definition of rich/wealthy?
Is there a consensus?
I’m sure for many people it’s all relative, dependent on their personal situation and can be quite subjective.
Regards,
Robin
What would you suggest?
Your opinion matters too
You could start with anyone with income or gains of £150,000 or more and so taxed at the additional rate, and anyone with net assets of £1 million or more. Each is in the top 1 or 2 percent. You could halve those numbers – income and gains of £75k, or net assets of £500k – and still be in the top 5%.
I am comfortable with starting there
Net assets of 500k. Accumulated over 40yrs work? You consider that wealthy?.. you can’t just go by top 5% or whatever. It is inevitable that people who have worked longer have more assets. The other key point is that after working 35- 40% and walking into your definition of wealthy and hit by a wealth tax it happens when ones earning power is diminished or ceased altogether through retirement..it will be seen by the older generation as unfair, penalising a life of hard work and will cause a lot of resentment… it’s a long way from the duke of Westminster and his cronies!
How much of that asset worth is a house?
And how much of that did you actually pay for?
Why should that excess be tax free?
“How much of that asset worth is a house? And how much of that did you actually pay for? Why should that excess be tax free?”
Do you want to tax capital gain on first property? That’s not the same as a wealth tax starting at 500k. Someone who bought a property paid a mortgage off over 40yrs, has retired and is now been told to pay a wealth tax on inflation where the abode is unchanged and has to pay a tax when they are only earning retirement income?.. I am sure you can imagine the problems it would cause. So much so it would be so unpopular it would be ripped up before it saw the light of day.
If you really want to redistribute wealth look at it properly. Someone who has worked 40 odd years is no high flying rock star, footballer or should biz personality.
Tell me the problems it would cause? Why can’t the charge be settled by a rolled up claim in the pro[perty if cash flow is an issue? Explain, please?
It is unfortunate, but the definition of wealth or richness must relate in some manner to income or assets or both.
According to the inheritance tax statistics, from around 600,000 deaths each year, only 10,000 estates report net assets exceeding £1m. Only 20,000 have net assets exceeding £500,000. A large number of the other 580,000 people have also worked hard for decades, perhaps as a nurse or teacher or care worker rather than as a banker or a lawyer or landlord, but just not lucky enough to generate a sizeable personal fortune.
The ability to pass on hundreds of thousands of pounds to one’s children tax-free (often much as Richard suggests unearned inflationary gains from real estate) is almost by definition entrenching privilege and inequality. It will be fascinating to see what that lucky decade of 18 year olds do with their modest child trust fund nest eggs. The parable of the talents all over again (although I always felt a bit sorry for the third servant who buried his one talent, who was only trying to manage downside risk with much less to lose).
Agreed Andrew
A great deal of nonsense is written on this issue
Thanks for some facts
Some years ago there was a review of a biography of MacMillan in the Guardian.
They said that one of his political aims was to prevent him & his class ending up hanging from lamp posts.
I find it interesting that while Churchill was a reactionary, even by the standards of the time, he also appears to have a keen awareness of how far he could push things, in the UK at least, and the concessions he needed to make to avoid revolution.
Possibly something that todays wealthy might like to bear in mind.
Taxation of wealth is a challenging problem because it attracts emotional resistance alongside the economic logic. And part of that is the fact that the paper value of property bought as a home (and not as an investment) doesn’t feel like wealth. I have been dealing with my late mother’s estate, and judging by the figures above she was in the top few percent by wealth, largely due to the value of her home which she had lived in for some 50 years (its original cost was significantly less than the transactional costs of selling it). But she never thought herself wealthy, because she hadn’t been well off through her life.
I can’t suggest an answer, because the question isn’t just “what is a fair solution?” but also “how do you get there from here?”. Personally I think the taxation system should ensure those who strategically gain an income from capital gains aren’t advantaged over the majority of us who need to accept the PAYE taxation on a salary, which suggests using a consistent set of tax rates and bands which extends up to the higher levels of wealth. It seems to me fair only to exempt primary residence until wealth is extracted from it (e.g. downsizing or realisation at death) but I don’t know how that could be made politically acceptable.
While inheritance could be taxed as capital gains, which could share the same rates and banding as income tax, that does introduce significant practical problems. For example general advice has always been to retain financial records for 7 years before destroying them — how do you deal with an estate where there is quite reasonably no record of the original transactions?
But without intending to be defeatist — given the dual challenges of Covid and Brexit I can’t see politicians of any persuasion prioritising consideration of this issue at the moment.
I suggested a way to charge cgt on final disposal in The Joy of Tax
There is a tendency for almost everyone to think they are not wealthy because they compare themselves to their immediate neighbours, there is always someone with a higher salary, bigger house, faster car, holiday home, yacht, helicopter, etc. But it is a big country and there are lots of people you probably don’t see or interact with every day. So it helps to understand some very basic facts.
In the main, the UK is still a nation of owner-occupiers – about 2/3 of households are owner-occupied, and about 1/6 private rented, and about 1/6 social rented (now a bit less than private rented) . But the median house price across England and Wales is about £250,000 (with all due respect to Scotland and Northern Ireland, I expect their median is lower). Yes, someone with a house worth £1m or £500,000 is in national terms wealthy, even if they don’t think they are.
Starting from another direction: UK private wealth including pensions is about £15 trillion. About a third is property wealth, about a third is pensions, and everything else (including financial and physical wealth) accounts for the rest. Divided by about 60 million people, that is about £250,000 each, but (understatement of the day) it is not evenly distributed. Having net assets of twice or four times that amount definitely makes you wealthy in national terms.
Well said
Thank you
What is your view on 100% land value tax – not to replace other taxes except existing taxes on land and buildings but to boost government spending. The surroundings give locations their values, none of it is the individual landowner’s effort. Why should landowners collect or enjoy all that land rental value (not including buildings, highest in Central London) for little or no payment, when the whole of society creates land values? Please consider it as an option part of progressive toolkit. You should support capturing location rent publicly.
I do not agree: it provides no indication of capacity to pay and tax is not required to fund government spending
I support LVT, but as one of many taxes