All attention last week was focused on the midterm election results for the Senate, House of Representatives and governors in states in the USA, and with good reason. However, when the States go to the polls, they really do go to the polls. Very large numbers of positions in the USA are subject to a ballot, as are some other issues which require referendums to determine policy.
In California, there was such a referendum last week. It was on what was called Proposition 40. The proposal was that California should adopt a billionaire wealth tax which would impose a one-time 5% tax on individuals and trusts with over $1 billion in assets and allocate the resulting revenues to fund healthcare, food assistance and education.
I stress that, whilst, as I normally say, tax does not fund anything, that is only true at a federal level in the context of the USA. At a state level, the states themselves cannot create the currency they use because that is created by the federal government, and as a result, tax does fund their spending. In this case, therefore, the link between the tax and the spending outcome was appropriate, although proposing a one-off tax to fund long-term spending makes no economic sense to me.
As it turned out, this will not matter. According to the New York Times, the proposal has been rejected by about 52.8% to 47.2%. California will not be getting a wealth tax, and this setback will undoubtedly impact other campaigns for a wealth tax elsewhere in the USA, and maybe elsewhere.
However, as I have long pointed out, and as I demonstrated in my Taxing Wealth Report, we do not need a wealth tax to significantly increase the amount of tax raised from those with wealth. This goal can be achieved within the existing tax system in the UK and could raise significantly more revenue to achieve the goal of reducing inequality than any wealth tax that has been proposed for this country could. What is more, because each measure could be introduced individually, and I proposed up to 30 in all, of varying degrees of revenue effectiveness, the cliff-edge effect seen in this poll in California could be avoided, making delivery a much higher probability.
This was an issue I discussed with Aaron Bastani in my interview with him for Novara Media last week. They have now clipped that section of the video and published it as a separate video in its own right. That's here.
I suggest all those who are suffering disappointment in response to this result in California take a look. There are better ways to do wealth taxation than by imposing wealth taxes.
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Recognizing the current under -taxation of the rich is all that is required in my view – the tax system for the rich is like a reward card.
I mean, let’s think about it. One of the principles of current tax regimes is to argue that the rich are self sufficient and do not need public services or other stuff normal people use so it is immoral to ask them to pay for anything; or they are encouraged to do things that only they can afford to do (like plant trees on their large estates).
So does this mean then that they just stay at home all day and not use roads, fresh water, electricity or even fresh air (which they pollute with their helicopters and executive jets). It’s as if the rich are inert, their contributions whether through the arts or tree planting in the countryside replace the provisions of the commons and this is seen as beneficial .
But they are not inert – they get around, network and are always on the prowl for more. And everything they have is taken – from us and the planet itself.
Let’s not forget they got rich by exploiting the labour of others.
Some sensible comments in there but also a serious point on revenue raising which has been overlooked which is behavioural changes. We’ve seen the end of non-dom status in the UK and this is a good example. The suggested £3bn to be collected according to the Taxing Wealth Report was contradicted by Warwick University researchers who said they’d modelled that number without accounting for behavioural change and other modifiers. We know have some evidence that revenue has not risen at all. Another example was the proposal to raise Capital Gains Tax beyond the revenue maximising rate which the Treasury believes is around 24%
https://www.ft.com/content/f7433f80-a926-4582-8355-67c07aebe5ea?
The Treasury model is based on Laffer.
Even the IFS disagree.
And revenue is not anything when it comes to tax, as I explain often, but which you seem to be ignoring.
There are six reasons to tax:
1) To ratify the value of the currency: this means that by demanding payment of tax in the currency it has to be used for transactions in a jurisdiction;
2) To reclaim the money the government has spent into the economy in fulfilment of its democratic mandate;
3) To redistribute income and wealth;
4) To reprice goods and services;
5) To raise democratic representation – people who pay tax vote;
6) To reorganise the economy i.e. fiscal policy.
The goal of Gary Stevenson’s campaign was to raise awareness of the growing wealth inequality, and to look for solutions to curb the accumulation of wealth by the billionaire class.
One criticism, I feel like you’ve taken the slogan, “Tax Wealth”, far too literally, but, everything you suggested would be a great start to tackle the fundamental issue.
Oh, come on.
All he talked about was having a wealth tax, like Gabriel Zucman.
Don’t offend your own intelligence by claiming otherwise.
Fair point, although I would argue that many people who started supporting the movement weren’t aware of the specific tax proposal being put forward, but were fully behind the underlying issue of wealth inequality.
Either way, I think there’s a real opportunity for you to build on that wider public support. Is there a reason you haven’t considered picking up that momentum, but pursuing the objective using the ideas and solutions you’ve outlined?
I have been doing tax justice for 20 + years. I co-founded campaigning on the issue. But almost all current campaigners refuse to talk to John Christensen and me now. We are the devil for having once cooperated with the OECD, which makes us impure, and actually knowing what we are talking about.
I agree there’s an element of taking the term “wealth taxes” too literally. For me “wealth taxes” are taxing the sources of income for the wealthy. This includes adding national insurance to rental income, inheritance tax, taxing dividends at the same level as income.
That is not what proponents of wealth taxes say.
Yes that’s true. Maybe we need to widen the definition to say that wealth taxes are taxes that target the primary sources of incomes of the wealthy while ensuring their actual collection is achievable.
Completely missed the Taxing the Wealth Report somehow. That’s absolutely revolutionary. I mean most of this I believe we all knew, still it’s different thing to comprehend the whole picture and implications.
Thanks.
Thank you.