The TUC has this morning called for a national debate on the taxation of wealth. They have got wide coverage for doing so. I admit that I had no idea that they would do this on the same day as I launch the Taxing Wealth Report, but I think that the coincidence is fortuitous.
The TUC's logic is impeccable: any incoming government will, without a shadow of a doubt, need to raise new tax revenues during the course of the next parliament. If any of the multitude of crises that this country now faces are to be tackled during that period then new taxes are unavoidable because the economy is at or near full employment and inflation would otherwise arise if government spending was increased without taxes rising.
Larry Elliott, discusses this issue in the Guardian this morning. Like me, he has reservations about the need for a wealth tax. We are agreed that these would be inefficient. But, as he notes, whilst she has ruled wealth taxes and some other changes out of consideration, the reality is that Rachel Reeves has not ruled out changes to existing taxes in the pronouncements that she has made. As a result, he notes the work that I am now doing and says:
By ruling out a new wealth tax, Reeves appears to be denying herself a lucrative source of revenue, but things are not necessarily that bleak, according to Prof Richard Murphy, a tax expert. He says Labour is right to rule out a bespoke levy – something that he says would be difficult to collect, owing to the ability of the super-rich to employ the best financial advisers and lawyers – but it can more easily tax the wealthy through the current system. To take one example, the better-off get higher rates of tax relief on their pension contributions than those earning less. Restricting pension tax relief to 20% would raise up to £14.5bn a year, according to Murphy's calculations.
There are other options, too. For example, national insurance is currently paid by workers, but not by landlords. Capital gains tax could also be raised. Financial services could lose their exemption from VAT. In total, Murphy has a list of 30 reforms that he says would raise £50bn a year for Reeves, enough to pay for both better public services and tax cuts for the less well-off.
It is Larry‘s opinion that Rachel Reeves will have to use the wiggle room that she has created by not ruling out changes of the type that I am going to propose to raise the revenues that she will undoubtedly need if she is to be Chancellor of the Exchequer in the next Labour government. This is interesting to note, and provides valuable support as this work gets underway.
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If the argument now is that inflation is not principally an externally generated problem, then I submit that is the primarily the cost of Brexit coming home to roost. Given that the demographics are so bad, the problem is permanent.
In Scotland, with a fertility rate of only around 1.3 (base replacement rate, 2.1); the deep, unconscionable, self-absorbed, unforgivable, utter stupidity of elderly Unionists has guaranteed that old Scottish Unionists have led Scotland to an inevitable end, in the extinction of Scotland. The core Unionist belief in life, of course is simply defined: “it’ll see me oot”.
They want you to believe they care about grandchildren and future financial burdens. Frankly, they don’t give a damn.
Agreed
Good to see you have Larry on board, plus the TUC announcement. Can we hope coverage will spread beyond the Guardian? And of course to the Labour party!
BTW, in para 2, ‘fullappointment’ should presumably be ‘full employment’ …
I am writing on the tube this morning….
Is the report being sent to the Labour Party, TUC, media etc? Or are we relying on them finding it organically? What is Richards’s opinion on others forwarding links to interested parties, maybe the more times such emails show up in inboxes the more chance there is of the report being widely read and, now here’s a thought, ACTED upon!
I have sent it to the TUC
I have sent it to other parties where I have the right connections
Caroline Lucas has retweeted stuff this morning
Bit feel free to share with anyone.
Wiggle room. Fingers crossed, though, of course, it’s entirely likely that effort via the media and the think tanks of the elite, will now be directed to apply pressure to eliminate this wiggle room.
I agree with the restriction of pension tax relief to the basic rate of tax, but I would also suggest a reduction in the annual allowance as this directly relates to the lost tax (perhaps this could be a stepping stone to reducing the tax relief)
There is a serious problem with this debate on taxing wealth to increase funds for government spending. It only serves to reinforce neoliberal framing, as Bill Mitchell points out in this post: https://billmitchell.org/blog/?p=61142.
There are very good reasons to tax extreme wealth, but governments sovereign in their currency do not need to tax in order to spend.
And they also do not need to “borrow” – i.e. offer risk-free (and tradable) interest bearing deposit accounts for very rich individuals or corporations – in order to spend.
This is mildly tedious.
I acknowledge that governments do not need revenue to spend.
But let’s not pretend they do not need to tax. If near full employment then money created has to be withdrawn from circulation via tax and that makes tax an essential component of the government funding system and to pretend otherwise is straightforwardly wrong.
So please don’t pretend otherwise. It’s time Bill Mitchell stopped undermining MMT by doing so.
It would be a good idea to send your report to the LibDems too.
Vince Cable was good on financial matter and Ed Davey used to be the financial spokesman but now it is Sarah Olney.
As a LibDem I feel we don’t get the coverage we deserve and with the other two parties trying to follow the same line there could be a good response from a party seeking to be different.
In the past, under Charles Kenedy there was a popular (amongst some) proposal for an extra penny on income tax for education, and proposals to “Axe the (council)Tax”, and in the smaller print, replace it with a local income tax.
Land value tax has long been a Liberal favoutite, so there is plenty of thought about funding the future.
Tax fairly and Spend wisely seems a good mantra.
Also with likelyhood of no overal majority at the next General Election the LibDems may have some influence.
I have sent this material to the LibDems
The idea that Reeves is leaving wriggle room to increase existing taxes on wealth may be clutching at straws. Her cant response recently has been the ‘tax burden’, whatever that means, is currently greater than at any time in the last 70 years. She conflates all taxes together into a single burdensome blob that is supposedly hindering economic growth. Her reversion to this crude populism, in the face of obvious public support for a fairer distribution of wealth is a pretty clear indication of her actual intent, I think. If I had hope, I would hope that I was wrong.
I share your concerns