I like Trevor Noah and the Daily Show in the USA. This is worth watching:
This from Trevor Noah on taxing billionaires is … pretty perceptive! pic.twitter.com/8hv4HKZLtQ
— Teddy Schleifer (@teddyschleifer) May 7, 2022
These are intelligent questions from an intelligent man making a mockery of the supposed culture of an economy based on financial speculation and the claim that we cannot tax that.
But actually, we can. In the event of supposedly unmarketable assets on which wealth tax might be due (and there is no reason why, eventually, where eventually is within an easily foreseeable timescale, we might not have a wealth tax in which this situation might arise) tax cannot be paid. We just take part of the asset in lieu of cash owing.
So, if 1% of a company is due in tax we take shares that settle the tax due (which might mean taking much more than 1% of the company as a 1% part of the company is worth much less than 1% of the whole when someone else would owns the remaining 99% and it is the owner of the 99% that we are taxing). So 5% of the shares might be paid over to settle the 1% tax lowing in that case, to be held by the state for the benefit of all people in the jurisdiction, collectively. And who pays for the valuation? The taxpayer does, because they could always find the cash instead.
With land and buildings, it's much easier: you just slap a legal charge on the building for the part due and require that rent be paid on the part the state now owns pro rata to the rental value of the hole. So, if a property is worth £1,000,000 and 1% tax is due the state claims ownership of 1%. If the rental value is £60,000 a year, £600 is now due to the state a year. It's really not hard. And in the event of people being in retirement we just roll the bill up until death.
We sure as heck can tax wealth.
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Aside from the practical difficulties of a wealth tax it has failed in France for example. More than 12,000 millionaires left France in 2016, according to research group New World Wealth. In total, they say the country experienced a net outflow of more than 60,000 millionaires between 2000 and 2016. And so the wealth tax was removed in 2018.
If you really think that’s true live with it
But maybe the remains French were better off without them – they weren’t paying anyway by the sound of it
“remaining French”?
We do face a problem that Michael Sandel calls “meritocratic hubris” (the owners of wealth no longer think they owe anything to he societies which created their opportunities). However, I don’t think that taking a state share in private assets is a good approach for several reasons
1) Managing a huge sovereign wealth fund becomes a distraction from core government responsibilities. It also creates huge scope for corruption (look at current Tory government!)
2) Such a fund would be hugely complex with tiny shares of every asset and company. Would the government buy and sell shares to maximise the growth of the sovereign fund? If not aren’t they failing their public responsibility?
3) in areas where innovation is needed, progress can benefit from single owners who have 100% control over an asset. Once ownership is diluted these decisions become complicated. What if the owner wants to borrow against their asset. They wish to take a risk, but this dilutes the government share, and may even become legally complicated.
Of course, allowing individuals the option to delay a tax obligation by offering a share in assets to be paid upon death makes sense in some cases. (eg for a local authority to provide care for an elderly invalid), but as a general policy, I do not think the state should take minority shares in private assets.
Taxing the benefits of wealth is a huge Global challenge as inequality continues to accelerate. However, the best solutions will come from less corruption in government (particularly RCV to reduce the hold of wealthy special Interest groups over government policy).
International effort is also vital. We need true cooperation to expand approaches such as country-by-country reporting, ending anonymous holdings and trusts, a Global wealth asset register, minimum Globally agreed tax rates, and a small Tobin tax on international financial trabsactions.
If we make then work, these approaches will produce a better result than systematic nationalisation of private assets.
It’s only a solution to a small part of a small tax
But if it says we can tax wealth, rather than we can’t it’s vital
And bluntly, I seen one of the issues you suggest as being problems as being any problem at all.
“I see none” instead of “I seen one”?
Apologies
I am fitting moderation in between family commitments today and am using a phone
If this is an issue:
in areas where innovation is needed, progress can benefit from single owners who have 100% control over an asset. Once ownership is diluted these decisions become complicated. What if the owner wants to borrow against their asset. They wish to take a risk, but this dilutes the government share, and may even become legally complicated.
They can always buy the shares back.
My house is worth £60,000 and my annual council tax is £1,200.
That’s 2%.
Seeing as I don’t think you’re going to be cutting my wealth taxes, well I’ve never seen it suggested, I can only assume that you want to charge the higher value property owners at around 3%. Not a bad idea in my view, I just wish so-called progressives would make it. It’s really not hard.
This blog does not answer all issues in every post, but is a thread in itself
I have aunts made clear wealth taxes are only for a small part of society
Should this be “I have always made clear”?
Homeowners are a small part of society. Certainly a lower % of the population than those who voted Conservative in 2019.
But at least we’ve established that you think 3% wealth taxes on the wealthy are the realistic amount. Has any country ever pulled that level of wealth taxation off?
I am sorry, but that is not true
Well, well!!
The younger generation eh?
There’s hope!
“With land and buildings, it’s much easier: you just slap a legal charge on the building for the part due and require that rent be paid on the part the state now owns pro rata to the rental value of the hole.”
Notice that in a global world you can move intellectual property, you can move corporate structure, you can move shares; but in any business in which you are operating and require a physical foothold in the country in which you operate (even just to distribute ‘real’ goods), you can’t move land.
The national institutions of parliament, law and tax generally, may still intuitively live in a naive world closer to the quill pen than the digital age; but even the law and tax can always still handle the taxation of land; if little else that stands the test (beyond taxing individuals, too often whether they can afford the tax or not – PAYE, NHI, VAT). Historically, taxation has been passed from land (feudalism), to business (commercial society), finally and almost exclusively (since neoliberalism), to those with least power; those possessing the weakest vested interests (ordinary people) and who have proved the easiest and cheapest for political parties, government and their media, to deceive, exploit and manipulate – at least cost to the corporate and land interests which fund and control the national political agenda..
The pure digital commercial operation, which offers solely intellectual property or services from a permanently movable international base is more problematic for the traditional national state; but the failure of neoliberalism is that it deliberately does not wish to address this fundamental problem, principally because it is such an old, and ill-conceived idea that the problem never occurred to its founders; and because the thinking of neoliberalism’s current exponents is so poorly thought through, they fail to see the critical nature of the problem for the nation state. This means that neoliberalism is essentially establishing itself as inimical to the security and prosperity of the nation state.
Agreed
I have to say that I am dubious of the very notion of intellectual property. Here is Richard Stallman’s take on it https://www.gnu.org/philosophy/not-ipr.en.html
As a copyright owner I am not
Mr Hurley,
Property is not a physical object, it is an idea; like the law itself.
I have a number of worries about the concept of intellectual property as currently understood. First it conflates 40 legal concepts, including copyright, patent, trade mark and trade secret, which vary widely as to their intended purpose and to their legal niceties.
In many cases it seems to me that considering these to be tradable property is to the net disadvantage of either society, the original “owner” or both.
Since you have mentioned copyright, I will take this as an example. Construed, as it once was in French law, as the right of the author(s) of a work to licence the copying of the work it sees reasonable enough, but what is gained by making it “property” that can be bought and sold? The percentage of authors who stand to make a significant profit by selling this property is minuscule. Publishers would not be able to demand the assignment of copyright to them as a condition of publication, but would they stop publishing? — I think not.
Some problems with copyright being tradable property:
1) The publishers of William Lloyd Webber’s oratorio The Divine Compassion are not selling any more copies of the score or parts and have refused to allow libraries to make photocopies of them even though there are several choirs around the world who would like to perform the piece. Unfortunately this is not an isolated case.
2) The British Library has tens of thousands of books whose authors, some of whom are quite well known, died years ago. In many cases they are still in copyright but with an unknown copyright owner. I would wager that in the vast majority of cases there would be no damaging consequences if the library digitised these books and put them on their web site. However the library, factoring in the possibility of being sued, will not do so. This means a significant part of our cultural heritage is being denied to us. The usual justification for copyright is that it encourages authors to be more creative but it is difficult to see quite what encouragement this situation gives to authors who died over half a century ago.
3) The problems are even greater for software writers. One of reasons for the existence of the software licenses like the GNU GPL, which effectively make owning the copyright of the software being licensed valueless, and make it more or less irrelevant who owns the copyright of the software. I could go into more detail about why this is but it is worth contemplating the fact that many software authors employ quite sophisticated legal instruments to mitigate the effect of a law whose only justification is that it encourages them to write that software in the first place. In this particular case I would say that no copyright laws at all would be better than what we have at the moment.
Mr Hurley,
I agree that there are ways in which intellectual property and copyright are exploited, but Stallman’s rather loose phislosophical approach seems to me unsatisfactory. The problem is not philosophical, but a matter of the law; which lives in the past and is too slow to act either when technology changes, or because of its inherent deep commitment to the underlying permanence of legal property rights as a first pricniple. There are times the law has intruded to restrict copyright (from films, through broadcast to books) to restrict rights – very modestly – to 25-70 years, depending on the method of reproduction. The problem is the law particularly, statute and of course politics, rather than a philosophical issue about the ownership of ideas, which I consider a ‘red herring’ propsed typically – by lawyers.
Thinking outside the box here actually there is a relatively trivial solution.
Where a private company owes tax of 1% on the value of the company you simply hold a public auction for that 1% of the company. Anybody can bid to buy the 1%, and whatever is paid for that 1% goes to the government.
That way you end up with a fair valuation of what people are really prepared to pay. I might expect existing shareholders to buy the share that is up for auction, but if the share really has a reasonable value somebody else is going to bid for it as well. If nobody wants to bid for it then it probably has no value.
I suspect there would be a whole new business in checking over company reports and accounts to find which companies were worth buying a 1% share in. In essence this is really no different to the way in which shares in any company are valued.
What the clip exposes for me is the sleight of hand of modern wealth management and the predilection for taxing labour as opposed to wealth. It gives tax as a phenomenon a bad name for a start amongst working people and makes it look punitive.
There is no real excuse for not taxing Musk’s millions or anyone else’s.
Wealth needs to be taxed for lots of reasons (and the growing divide between rich and poorer or poorer is proof enough) and some of those are the destructive reasons – wealth being used for destructive speculation, developing ways to extract rather than contribute, finding its way into political parties and rendering its owners powerful enough to be unaccountable to the world are top of my list.
Under Neo-liberalism, wealth has had the opportunity to prove that it can be responsible and moral if left alone.
The truth of the matter is that wealth has proven that it cannot be trusted, cannot be moral and that it thinks differently because it becomes a thing ultimately unto itself.
Wealth has had its chance and its blown it. In my view it’s time to pay up.
> which might mean taking much more than 1% of the company as a 1% part of the company is worth much less than 1% of the whole when someone else would owns the remaining 99% and it is the owner of the 99% that we are taxing
I’m probably being stupid, but I didn’t understand this bit. Could you explain it a bit more?
If a person owns 99% of a company they own almost all of it and so whether they own 99% or 100% makes little difference to the value of their shareholding
To pay a tax of 1% of that value might then require quite a number of per cent of the holding be paid in tax – probably more than 5% or more
If The Rich wont let us tax them officially, the way things are going they might find themselves taxed via crime, riot and revolution
“So, if 1% of a company is due in tax we take shares that settle the tax due (which might mean taking much more than 1% of the company as a 1% part of the company is worth much less than 1% of the whole when someone else would owns the remaining 99% and it is the owner of the 99% that we are taxing). So 5% of the shares might be paid over to settle the 1% tax lowing”
So if a company has 20 shareholders, each owning 5% of the company, whose shares do you take?
It’s not a tax on the company
It’s a tax on the shareholder
This is a wealth tax
How stupid do you have to be not to notice that?
“With land and buildings, it’s much easier: you just slap a legal charge on the building for the part due and require that rent be paid on the part the state now owns…So, if a property is worth £1,000,000 and 1% tax is due the state claims ownership of 1%”
So in 100 years, the state owns everything?
Did you read the context for this?
Clearly not
“if 1% of a company is due in tax we take shares that settle the tax due (which might mean taking much more than 1% of the company as a 1% part of the company is worth much less than 1% of the whole when someone else would owns the remaining 99% and it is the owner of the 99% that we are taxing). So 5% of the shares might be paid over to settle the 1% tax lowing in that case, to be held by the state for the benefit of all people in the jurisdiction”
There would be no point doing this if it didn’t also apply to LLPs so presumably you’re OK with 5% p.a. of your LLP profit share being assigned to the state. Given that your LLP was formed in 2005, by now the state should be entitled to 85% of the profits.
Do you know my wealth?
Or are you just being stupid?