According to the BBC this morning:
Former Health Secretary Wes Streeting has proposed introducing a wealth tax as part of his pitch for the Labour leadership, by equalising capital gains tax with income tax.
Streeting called for a "wealth tax that works" and said he estimated the reform could raise £12bn a year.
Now, where did Wes Streeting get this idea from? And where, come to that, did his estimate of the tax that it might raise come from?
It so happens that the £12 billion figure that he refers to is exactly the sum that I proposed might be raised as a result of the equalisation of income tax and capital gains tax rates in the Taxing Wealth Report.
Might it be that Wes Streeting's advisers have been reading my work?
If so, it's a pity that they ignored the rest.
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The Sweeting suggestion is to equalise rates but apply to gains after inflation. Indexation I think he called it. He’s kept quiet about that part as all the ‘get the rich to pay even more’ crowd are going to be moving to his side.
There is no justification for indextion unless income of taxed an 2015 prices.
Indexation has an argument that a gain of inflation is not a real terms gain and should not be taxed. I’m not averse to that argument.
However, since you’re only taxed when you sell the asset then if you have a long-term holding then you will have been able to compound untaxed gains for years compared to someone trying to save income towards a better future.
Because of that, you could argue that if unearned income is to be taxed only after applying indexation, higher top end rates of tax need to apply to balance for this year-on-year benefit.
Further, you can reasonably argue that if you want to reduce wealth inequality then indexation is not desirable. Not applying it would help redistribute wealth to some extent. After all, that is really the goal of wealth taxes – to provide better distribution of assets, and protecting the existing privilege of the wealthy should not be the goal.
In between, you might consider an indexation cap or allowance to support smaller investment returns without gifting favourable returns to whose wealth SHOULD be distributed somewhat.
All noted
I word of advice about Streeting and the rest of the weaklings in the Labour party:
Watch what they do; not what they say.
Well done Prof, your reach will continue.
Thank you
Did I hear the Overton window creak a little?
To mix the metaphors a little – maybe it was the sound of a fox being shot?
They pinch the ideas because they are scared your ideas are cutting through. They are.
Even if Streeting resurrected the 2017 manifesto, I wouldn’t trust him.
Congratulations Richard
Cometh the hour, Cometh the man.
Necessity demands truthful solutions for which there is no substitute.
I guess he refers to the Gabriel Zucman’s tax (2% on wealth would be considered a 50% income tax)
Follow the plot, not the characters, said C S Lewis. If we’d done that before Starmer made his false promises, we might be in a different place.
Also: Be wary of the Greeks, especially when bearing gifts.
I suspect Streeting is now the ‘chosen one’, a placeman who will carry on taking Labour to the right, but he is making gestures to keep some left- wing support. It is highly unlikely that he intends to deliver on such promises.
Burnham has to keep the anti- immigration/ Brexiteers on board to try and win his by-election. If he manages that, we might see his true colours.
Neither of these people are likely to implement much of Richard’s Taxing Wealth Report because their backers don’t want them to.
I don’t think anyone else will emerge to challenge Starmer. It looks like a neoliberal stitch-up for the foreseeable future, sadly I’m afraid.
“wealth tax that works”……..for the poor or the rich? I’d no more trust Streeting’s words than those of… (thinks)……. Mandelson, oh hang on,. wasn’t Wes good mates with the same? – groomed in the dark arts by all accounts. Substitute “power” for money and this could be Wes’s theme tune:
https://www.youtube.com/watch?v=fVuSYUNAekc&list=RDfVuSYUNAekc&start_radio=1
Seems like he has. Also in The Guardian today Daniela Gabor has written a piece on bond vigilantes. Not full on MMT exactly but I think you might be starting to cut through
Daniela has never been full on MMT, but she is close.
I put a link to taxwealth.uk
every little helps
Thanks
I heard Streeting this morning and surprisingly he said all the right things, one could almost believe that he cared! The trouble is he is the “Wes Streeting” a LINO who carries a lot of very heavy baggage. One thing I did not hear was an apology for being a Neoliberal and for being a member of a cabinet that enhanced existing wealth at the expense of the many. Nevertheless perhaps his reading of your “Taxing Wealth Report” has shown him a new pathway. I will not be holding my breath.
I wouldn’t
I think it is more likely Dan Neidle in his ear than this blog. Dan’s a nice enough guy, means well, is pretty sharp (well, sharper than me anyway)…. but I’m not sure about this inflation in capital gains tax thing. It sounds very complicated to work in practice. Would you have inflation tables to work out the tax?
Yes
They were used fir a long time in CGT
Putting aside equalising capital gains tax and income tax and however that might be introduced …
A rich person has income from unspecified investments. He presently pays tax at level x1. There is a change to tax at level x2, where x2 is greater than x1. So he loses some money. But his investments in the following year will pay more than s x (x2 – x1) where s is the sum taxed? So his complaint about the tax rise is a complaint about wealth increasing at a lower rate. Is that right? How would the numbers work out for present proposals?
Why will the investment pay more and why does your conclusion follow from that? I need to underhand the missing steps in your logic.
There are proposals to tax the wealthy. You point out that taxing wealth is very difficult but it is practical to tax income. So increasing tax on income for the wealthy will take away more money than is presently taken by tax. The wealthy lose. I see proposals to increase tax rates on the wealthy by 1% or 2%. I’m thinking that the loss is going to be made good in the following tax year (say) by income from investments that is greater than 1-2%. So complaining about the tax hike is a complaint about the rate of increase of wealth and not a complaint about real loss of money. Or perhaps the 1-2% numbers refer to taxing wealth rather than income? You will have command of the numbers that I certainly do not have.
What I find endlessly weird about Wes Streeting is every time he speaks I nod along with him and think, “goodness, Labour does have someone who gets it after all.”
And then he does something, like allow Palantir into the NHS or attack someone on the left for no good reason, and his actions speak louder than his words.
Have we not seen this game plan from Labour Together before.
Remember Starmer made a whole host of left leaning pledges to get the leadership and the three them out as soon as he could.
Let’s not forget that Labour Together never thought they would win in 2024 and saw Starmer as a place holder, to fight and lose in 2024 and Streeting taking over the leadership in 2025.
So like you I am not holding my breath.
Labour Together have now re-launched or been reinvented as ThinkLabour. Is there anything more substantial going on here than sloughing off bad press associated with McSweeney and the Mandleson business? There have been revealing moments before, such as when Cruddas resigned. When a ‘founder’ leaves an organisation saying it’s no longer in accord with his values, was he ever in charge? And when Josh Simons the Exec who engineered post-Cruddas LT recently stood down as an MP to make room for Burnham, was be also stepping away from LT or manoeuvring for it to embrace Burnham? And what will the declared distancing of ThinkLabour from direct links with Government and MPs amount to? Will we also see distancing from their major donors/sponsors who are identifiable néolibérals not easy to distinguish from those behind Reform or the Tories?
Every wedge has a thin end, we can but hope.
PS Sadly I cannot listen to Radio 5 without paying for a VPN, but full marks for being on their speed-dial list.
I get invited every 8 weeks or so
The key thing about both Streeting and Burnham’s recent pronouncements is the intended audience. Burnham is tacking right as he is trying to appeal to the leave voting electorate in Makerfield and Streeting is tacking left as he is trying to win over the PLP in the first instance and the wider party membership after that. In both cases it is an entirely cynical position and I wouldn’t trust either further than I could throw them.
Indeed one would hope that Streeting is as sceptical about the EU as Burnham needs to be about Mahmoud.