Wealth taxes are often said to be the source of the additional revenues this country needs to solve its financial problems. There are two problems with this claim.
The first is that government spending is not funded by taxation. It is funded by the Bank of England. I explain why in my ebook ‘Money for nothing and my Tweets for free', available online free here or as a hard copy, here. This does not mean a wealth tax is not important because it is, but it has to be understood why it is.
As importantly, a wealth tax is no panacea. Not only will they take years to introduce, but the revenue that they might collect is also hard to predict. This, though, does not mean wealth need not be taxed. There are many simpler and more effective ways to tax wealth more in the short term than by creating a wealth tax. I have provided the links to many blogs on this issue on this wiki page. The more important are here:
- There is significant room for wealth taxation in the UK
- The UK could tax wealth more
- The relationship between income, wealth and tax
- The TACS approach to wealth taxation
- Reforming taxes on wealth by equalising capital gains and income tax rates
- The need for an investment income surcharge
- Capping total ISA contributions
- Abolishing the personal savings tax allowance
- Restricting pension tax relief
- Abolishing higher rate tax relief on gifts to charity
- Reforming council tax
- Capital gains increase income inequality in the UK: the time to align income tax and capital gains tax rates has arrived
We can tax wealth more, and I think we should. But let's go for the low-hanging fruit first.
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I am your low hanging fruit.
I have a property, bought 30 yrs ago, that I rent out. I stayed at home and brought up my children, my isa contributions and property are my future, it’s all I have. . I feel very vulnerable and can’t hide what I have, like rich people can.
You’re coming for me.
Given that your comment does not make sense I have no way of knowing whether you are wealthy or not
But if you are, why shouldn’t you pay more tax?
You admit you have the means to do so
He may be able to pay more tax, and you ask why not?
So I will ask you- why?
If they have ISAs how can they not pay tax?
I don’t think anybody is suggesting that it all gets taken away from you.
How do you extract the income from your property?
Richard,
When Churchill was Chancellor of the Exchequer plans were started to introduce a Land Value Tax.
While the work had to be done with pen and paper, the assessments were done in about three years, so while its far from instant, a comprehensive LVT roll out doesn’t appear to present that many issues
It’s good to have links to these articles all in one place. I will send link to this post to various people I think could benefit from reading them. Whether they will or not, of course, is an entirely different matter!
Is income tax on imputed rent for home owners included there? It should be
No….
Because you don’t think it should be? An omission? Or because you don’t classify it as a wealth tax?
Sorry – but because of the way in which I see comments when moderating I have no idea what question you are responding to and as a result have no way of knowing wat our comment means
Scrap corporation tax and replace with a PAYE revenue tax. Far fairer for all and ensures corporations pay their fair share of tax.
A tax avoiders dream
And the way to increase inequality
It’s hard to make up tax stupidity of this magnitude
I agree entirely. In particular, that we need (and you offer) policies that can be implemented now; this no time for a long intellectual analysis.
Given the tax system we have today it is easy to limit/remove tax reliefs (on pensions, ISAs and gifts), alter rates and the bands over which taxes apply (income tax, capital gains tax, savings allowance). They could be done at a stroke – at an emergency budget in September, for example, for immediate (yes, same day) implementation to avoid “gaming the system”.
Council Tax is on your list and it is really important… but I suspect would take a little longer.
Council tax is in urgent need of complete reform. I think it should be replaced by a local income tax administered via a properly funded and staffed HMRC so that each council could collect sufficient tax to fund excellent local services. Local Councillors would then have an even more important role in ensuring that the needs of the local population were being met more fairly. Local debates would ensure good use of the income tax received. I would also add a tax de sejour for visitors using local hotels, guest houses and B&B’s etc.
Property tax should be addressed by total reform of domestic inheritance tax and CGT. We have a system which encourages investment in property as a good hedge against general inflation, but it has gone too far to the detriment of ensuring that there is sufficient housing for all families. The problem has been compounded by the right-to-buy policy, with councils being unable to pocket all the proceeds of the sale and not being able to build sufficient replacement homes.
Buy-to-let and inherit-and-let are both unreasonable. CGT on rented housing should be much higher to discourage this type of investment. It currently encourages speculation and accumulation in an what should be a basic right of all families to be housed at reasonable rents if they cannot afford to buy. The return on investment in housing in some areas is at least double the rate of increase in RPI leading to enormous increases in wealth for those able to inherit-and-let or buy-to-let.
Local incomes me tax is deeply regressive
High revenue in areas of low need and vice versa
How do you suggest overcoming that?
I was not suggesting a uniform regressive local tax.
HMRC already know who are the high earners in every location and the tax take to fund LA’s would be progressive. Just staff and fund them to collect a progressive local tax.
It is regressive because of regional variation: that is why it cannot work well
I agree, Council Tax/Property Tax needs reform. But this can’t be “instant”…. there are changes (to rates and bands of existing taxes) that could be immediate. Let’ do these now whilst we work on the thornier issues.
I notice your list doesn’t include inheritance tax . Shouldn’t this be included ?Inherited wealth is surely among the biggest drivers of inequality isn’t it ? Or are you arguing that inherited wealth should be regarded as a capital gain and taxed at at least the same rate as income from employment?
The latter
Abolishing the personal savings allowance completely might lead to a lot of unnecessary bureaucracy. For instance, my current account pays interest. It never comes to more than a few pence in a month and over a year it is certainly less than a pound. There must be thousands of people in the same situation. Is chasing such small amounts really worth the hassle?
I suggest that instead of abolishing it, it should be set to something like £100.
Deduct the tax at source as was done for decades