From The Daily Mail:
[UK Finance Minister] Rishi Sunak rejected a proposal for an emergency wealth tax to recover the staggering £280billion the Government has spent so far on the coronavirus pandemic. The Chancellor was presented with plans for a one-off levy on those with assets of more than £500,000, or £1 million for a couple, including their family home and pension(1).
But Mr Sunak has told allies that he has ruled out the suggestion because he believes it would be 'un-Conservative' and go against the party's aspirational values(2). However, he is still considering proposals to raise tens of billions from the better-off by sharply hiking capital gains tax.(3)
The Wealth Tax Commission(4) last month proposed a 5 per cent levy on housing, pension, business, equity and savings wealth that it forecast would raise £260billion. The tax would apply to every UK resident with assets of £500,000 or more and would include homes excluding mortgage debt.
About one in six adults – 8.2million people – would be liable, but the tax would largely fall on older generations who have paid off more of their mortgages and built up larger pension pots. Almost 40 per would be aged over 65, while just 6 per cent would be between 35 and 44 years old. The Commission recommended households pay the levy at a rate of 1 per cent a year for five years.
It estimated up to 10 per cent of those affected would be 'asset-rich, cash poor' and not have the ready money to pay for it. For those people, it suggested smaller payments for a longer period. (5)
1) Hooray for taxes on land and buildings, especially if they replace existing stupid taxes on land and buildings, such as Council Tax, SDLT and Inheritance Tax. Taxing pension funds is stupid because they are heavily subsidised. It it far better to simply reduce or phase out the subsidies. Taxing the value of 'business, equity... wealth' is even more stupid. If you want more tax from businesses, just reduce corporate subsidies, and if still necessary, hike the corporation tax rate. Taxing cash savings is even stupider; a proper tax on land and buildings (i.e. LVT) ignores mortgage debt and is levied on the gross rental value of the plot. So as a quid pro quo, cash savings shouldn't be taxed either, or it's heads-we-win, tails-you-lose.
2) 'Un-Conservative' just means 'won't go down well with voters'. The Conservatives are the political party with no principles whatsoever apart from staying in power as long as possible. The same applies to 'aspirational values', which is meaningless. With a full on-LVT and lower taxes on earnings and business output (which are real taxes on 'aspirational values'), people would still 'aspire' to earn more and buy a nicer house (or a nicer car or nicer holidays, or more savings, whatever, that's the whole point of earning more). And those who earn more would end up in the nicer houses and pay the LVT voluntarily.
3) This is pure tokenism. Capital Gains Tax in the UK raises about £7 billion a year, about 1% of all tax receipts (from memory - it's fairly small numbers). CGT was never intended to raise much revenue, it is basically an anti-avoidance measure to deter people from reclassifying heavily taxed earnings or profits as 'capital gains' (which were not taxed at all until 1965). The revenue-maximising CGT rate appears to be about 15% and we are already past that point on the Laffer Curve. So it is nigh impossible to raise significant extra money from CGT.
4) Wealth Tax Commission is an initiative of think-tank the Institute for Fiscal Studies. They are well-respected and influential but nothing official. Their numbers and estimates are almost certainly correct.
5) Also known as 'the roll-up and pay on later sale or death option', just to knock that KLN on the head.
