Wealth tax and the rich

[chas49]

Moderator Message:
This topic was probably posted in the wrong board. It's not about Taxes - Practical.

I am moving it to "Investors Roundtable - The Economy"

(chas49)

[ursaminortaur]

How do you know that the putative "wealth tax" would affect somebody like your oncologist?

If you look back through this thread, you will see things like "only the top 1%..." and figures like "£2m cutoff will raise £6bn". I am sure he is well in this bracket, and is also well in the top 1% pay bracket (probably just for his NHS work, and not including his private work). This is all before Labour gets greedy and starts reducing the threshold.

Look at the number of senior doctors who quit because pension lifetime allowances were reduced. How many of them have returned to work?

The lifetime allowance and annual allowance thresholds were all reduced by the Tories - under Blair and Brown these started at £1.5 million rising to £1.8 million in 2010 for the lifetime allowance and £215,000 rising to £255,000 in 2010 for the annual allowance.

If the Tories hadn't cut both the lifetime and annual allowances ( and introduced a taper for high earners on the annual allowance ) then few doctors would have had a problem.

[Gerry557]

Not everyone shares your thoughts. Some think we should all have exactly the same. Although some communists are more equal than others I tend to find.

I do not know of anyone who genuinely believes that everyone should have an exactly equal amount of money, if that were even possible, which it isn't. That is a particularly odd viewpoint to find on an investment website of all places - even The Guardian does not argue that.

But my point was that the primary purpose of taxation should be to raise revenues whilst minimising distortions. As such social engineering, if we have to do that at all, should be attempted by other means.

I guess you don't hang out at universities. It's quite popular. After all if you have nowt then you are quite happy for someone to give you something that used to belong to others.

Most go on to get a job and realise the mistake although some do go on and on and use it to get further up the chain. Jeremy Corbins and Diane Abbotts of the world.

Whilst I agree more with your views and the difficulty of communism it doesn't mean it won't exist but you are right about not finding them here. Occasionally they might visit to troll.

[Gerry557]

Moderator Message:
This topic was probably posted in the wrong board. It's not about Taxes - Practical.

I am moving it to "Investors Roundtable - The Economy"

(chas49)

Thanks Chas. I did struggle to decide which heading to post under

[Gerry557]

In the original post, Gerry 557 said
"I keep hearing these terms being banded about. Again on TV this morning with a discussion that included Rachel Reeves, Shadow Chancellor.

It's usually stated that it will raise enough to cover whatever needs some spending and will only be paid by the rich, whoever they are.

Has anyone come across a more defined term of either. Such as those with £5m+"

The answer is simple, the rich who should be taxed more are anyone who has more income, or assets than me and my family. We should be taxed less.

There should be more allowances and less tax for the Gerry's of the world paid for by increasing taxes on all those with names starting with a P.

Studies show that 98% of those polled at a recent Gerry meet up agreed and think society would be much better off.

[scrumpyjack]

I don’t think it is going to happen, at least in Labour’s first term.

Starmer and Reeves have been saying repeatedly that the only way to get more money for government to spend is by creating more wealth in this country not by more taxation.

Also it has been abandoned in most countries that used to have one, strongly suggesting it does not work well.

I think it would be a wealth destroyer. You don’t need many rich people to decide they’ve had enough and go and live elsewhere, to more than outweigh the tax raised from those who don’t scarper.

It is something that would have to be in the manifesto and they have already said they have no plans for a wealth tax.
Of course once Labour are in, the hard left who are being fairly quiet pending the election, will no doubt try to take control again.

[1nvest]

Not sure if this is in the correct heading.

I keep hearing these terms being banded about. Again on TV this morning with a discussion that included Rachel Reeves, Shadow Chancellor.

It's usually stated that it will raise enough to cover whatever needs some spending and will only be paid by the rich, whoever they are.

Has anyone come across a more defined term of either. Such as those with £5m+

What would be included or excluded?

Main residence or other property. Did Angela Rayner get a heads up
Cash, stocks and shares look obvious but what about ISAs
Pensions. You can see the value of a pot but should gov pension values be included.
Art and jewellery. Who would value it and how would they know. I'll sell you mine if you sell me yours. A penny each sounds fine can I have a receipt.
Should their be an age adjustment so pensioners pay less.
Should there be an area adjustable rate so lower for Lincolnshire than London.

I've also heard the term "one off" which usually means till the next one.

Obviously there will be loosers and we are being told the rich want to pay more. (So why don't they just do it then.) Apparently the rich can afford it but could we see granny on state pension having to pay it because her 3 bed semi in the south east is deemed over the threshold.

All inclusive.

Look at Connect and how the state increasingly is seeking to capture everything, your movements, thoughts/actions, assets/wealth (sources of income and spending). Part of the reason why bank transactions are now more difficult, banks are under - report all suspicious transaction, or else - pressures, so that the natural recourse is for banks to report all transactions to the state. When others know where you wealth is, its no longer yours, its just a loan.

Everyone reporting all of their assets into the state system, and then that can have taxes levied. Your pension pot value, house value, savings/investments, cars, jewelry ... a total wealth value figure for everyone, and then perhaps a 1%/year wealth-tax (the richer you are the more you pay). Perhaps £20Tn x 1% = £200Bn/year additional tax revenue for the state to throw away. Widowed granny in her £1M 3 bed, with a £15K/year pension valued at £400,000, £10K of other household assets, taxed at 1% = £14K tax bill (she's rich and can afford it, wealth of over £1.4M).

With the later introduction of electronic money, yet further tax streams become available. You've bought more than recommended red meat this month, your e-cash has been debited by £50 as a incentive to be healthier. You were seen jaywalking 5 times this month, your e-cash has been debited with £250 ...etc. In a Open Prison system the potentials for 'tax streams' are endless.

In bygone times people valued their privacy, to the extent that income tax was not viable, none of anyone else's business how much a person owned/had. Taxes were raised predominately on spending. Nowadays, no one cares about their privacy in effect are volunteering themselves to pay more, opted in. And the more the people are prepared to pay so the more the state can waste.

Of course pre-election it will be talked down, present just the plus side, absent of details of intended measuring/collection methods. And once up and running the 1% (whatever) initial figure will be inclined to be revised ... upwards. Granny should be encouraged to downsize/spend her great wealth, frees up a 3 bed single occupancy for 3 - 6 migrants.

[1nvest]

It is something that would have to be in the manifesto

That nowadays have less value than toilet paper.

[ursaminortaur]

Not sure if this is in the correct heading.

I keep hearing these terms being banded about. Again on TV this morning with a discussion that included Rachel Reeves, Shadow Chancellor.

It's usually stated that it will raise enough to cover whatever needs some spending and will only be paid by the rich, whoever they are.

Has anyone come across a more defined term of either. Such as those with £5m+

What would be included or excluded?

Main residence or other property. Did Angela Rayner get a heads up
Cash, stocks and shares look obvious but what about ISAs
Pensions. You can see the value of a pot but should gov pension values be included.
Art and jewellery. Who would value it and how would they know. I'll sell you mine if you sell me yours. A penny each sounds fine can I have a receipt.
Should their be an age adjustment so pensioners pay less.
Should there be an area adjustable rate so lower for Lincolnshire than London.

I've also heard the term "one off" which usually means till the next one.

Obviously there will be loosers and we are being told the rich want to pay more. (So why don't they just do it then.) Apparently the rich can afford it but could we see granny on state pension having to pay it because her 3 bed semi in the south east is deemed over the threshold.

All inclusive.

Look at Connect and how the state increasingly is seeking to capture everything, your movements, thoughts/actions, assets/wealth (sources of income and spending). Part of the reason why bank transactions are now more difficult, banks are under - report all suspicious transaction, or else - pressures, so that the natural recourse is for banks to report all transactions to the state. When others know where you wealth is, its no longer yours, its just a loan.

Everyone reporting all of their assets into the state system, and then that can have taxes levied. Your pension pot value, house value, savings/investments, cars, jewelry ... a total wealth value figure for everyone, and then perhaps a 1%/year wealth-tax (the richer you are the more you pay). Perhaps £20Tn x 1% = £200Bn/year additional tax revenue for the state to throw away. Widowed granny in her £1M 3 bed, with a £15K/year pension valued at £400,000, £10K of other household assets, taxed at 1% = £14K tax bill (she's rich and can afford it, wealth of over £1.4M).

With the later introduction of electronic money, yet further tax streams become available. You've bought more than recommended red meat this month, your e-cash has been debited by £50 as a incentive to be healthier. You were seen jaywalking 5 times this month, your e-cash has been debited with £250 ...etc. In a Open Prison system the potentials for 'tax streams' are endless.

In bygone times people valued their privacy, to the extent that income tax was not viable, none of anyone else's business how much a person owned/had. Taxes were raised predominately on spending. Nowadays, no one cares about their privacy in effect are volunteering themselves to pay more, opted in. And the more the people are prepared to pay so the more the state can waste.

Income tax was introduced to fund the Napoleonic wars in 1799 before that in the 18th century the main direct tax was a land tax and the main indirect taxes were excise duties paid by traders rather than consumers. Though you also had some other minor taxes such as windows duty.

https://www.parliament.uk/about/living-heritage/transformingsociety/private-lives/taxation/overview/taxes18thcentury/

In the 18th century, however, the structure of taxation was quite different. Direct tax was only paid by the owners of land or property according to the size of their landholdings.

This tax - the 'Land Tax' - was paid by the more prosperous sections of society, from the wealthiest duke to the owners of business premises such as tradesmen, shopkeepers and innkeepers. The rate of tax was set by Parliament each year in a 'Land Tax Act' and was usually between two and four shillings in the pound, based on the value of each individual's land or property.
.
.
.
The commonest indirect taxes paid by most people in the 18th century were excise duties. These were levied by Parliament on basic commodities - household essentials such as salt, candles, leather, beer, soap, and starch.

Duties on 'luxury' items, such as wine, silks, gold and silver thread, silver plate, horses, coaches and hats were aimed at wealthier consumers. Parliament raised or lowered duties, as well as adding new items or dropping others, depending on the needs of the time. In practice, however, consumers were largely unaware of these impositions as it was the traders who actually paid.

There were also 'Assessed Taxes', of which the best known is the Window Duty. This was first levied by Parliament in 1696 in support of William III's war with France. House owners paid two shillings on properties with up to ten windows, and four shillings for between 10 and 20 windows. From 1778 the rate was made a variable one depending on the value of the property.

[AndrewInDevon]

The distinction between income and growth (or the stock of wealth) is an anachronism. The wealthy exploit this by paying 20% tax on wealth (ie crystallised capital gains) v 45% on income.

I don't blame Labour for addressing this to level up the playing field. The key issue will be defining the level at which it kicks in, with appropriate allowances.

The LTA was one way of clawing back some of the generous tax advantages on pensions that higher/additional rate tax payers received. If they introduce a wealth tax then there's scope for hugely simplifying the tax system by equalising income/capital grains rates into a similar rate, so no need to re-introduce the LTA on pensions.

The LTA was £1.8m in 2011/12. If that was considered the limit of 'wealthy' pensions, then I'd index that sum for 12 years inflation then add a sum for non-pension wealth (so say, £3m/£4m) and let a wealth tax kick in at that level.

ISAs were a device to encourage savings but in the last decade stocks and shares ISAs have, in effect, provided a UK tax payer subsidy to capital allocation to the USA as the US equity market has grown while the UK market declined, in relative terms! ISAs made sense when they were introduced but they need reform - it makes no sense for the UK taxpayer to be subsidising US capital markets.

I'd also argue that with the huge rise in rented property, and the affordability gap, over the last 20 years or so, the property market has created huge distortions that give a massive tax advantage to home owners (generally getting older and older) which the rented (ie younger earners) are unlikely to enjoy.

There's a lot wrong with the tax system, generally in favour of the wealthy. I'd vote for a wealth tax and for maintaining inheritance tax, with the proviso there were sensible thresholds/allowances.

Then we can move on to the nonsense that is NI, which is a parallel income-tax system that has lost its original purpose...that also needs to go and blended in to income tax.

[Lootman]

The distinction between income and growth (or the stock of wealth) is an anachronism. The wealthy exploit this by paying 20% tax on wealth (ie crystallised capital gains) v 45% on income.

I don't blame Labour for addressing this to level up the playing field.

Labour is not "addressing" that. I have heard nothing from Starmer or Reeves about taxing gains as income.

And then you want to fold NICs into income tax so that gains are taxed at up to 65%? I would suggest that the tax take would decline in that event as people avoid or evade such a punitive level of tax. Even John McDonnell did not go that far during his 15 minutes of ill-fated relevance.

[scrumpyjack]

The distinction between income and growth (or the stock of wealth) is an anachronism. The wealthy exploit this by paying 20% tax on wealth (ie crystallised capital gains) v 45% on income.

The reason that CGT is set lower is because it does not take inflation into account. At one point capital gains were taxed at the same rate as income but after indexation of cost for inflation so that only real gains were taxed (NIgel Lawson as I recall). Indexation was subsequently abolished because of the complications, and instead nominal gains were fully taxed without allowing for inflation but at a lower rate than income to compensate. I think it was a Labour government that brought this in.

I inherited a small orchard in my father's garden in 1985. I sold it 35 years later for a price that was almost exactly the same in real terms as the probate value 30 years earlier. No real gain but I had a large capital gains tax bill for no real gain! That is why CGT is at a lower rate!

If you are going to tax gains as income, you have to reintroduce indexation for inflation - the Treasury will not want to do that.

[funduffer]

If you want another take on wealth taxes, then here is Richard Murphy's shopping list:

https://taxingwealth.uk/2023/09/13/the- ... ted-value/

The following recommendations have been made so far and will go on to form part of the Taxing Wealth Report 2024:

1. Restricting pension tax relief to the basic rate of income tax might raise £14.5 billion of additional revenue per annum.
2. Abolishing the VAT exemption for financial services within the UK might raise £8.7 billion of additional tax revenue per annum.
3. Reforming national insurance charges on higher levels of earned income in the UK might raise an additional £12.5 billion of tax revenue per annum.
4. Aligning capital gains tax and income tax rates in the UK might raise more than £12 billion in additional tax a year.
5. Abolishing capital gains tax entrepreneur’s relief, which might raise approximately £2.2 billion of additional tax a year.
6. Recreating an investment income surcharge in the UK tax system might raise up to £18 billion of extra tax revenue a year.
7. Capping the rate at which tax relief is given on charitable donations under Gift Aid might raise £740 million in tax a year
8. Abolishing the VAT exemption for services supplied by private schools might raise £1.6 billion in tax a year
9. The UK needs better estimation of its tax gap to prevent the illicit accumulation of wealth. No tax estimate has been made as part of this recommendation.
10. Capping ISA contributions to £100,000 in a lifetime might raise £100 million in tax a year.
11. Reforming the administration of corporation tax in the UK might raise at least £6 billion of tax a year.
12. Increasing the corporation tax rate for the UK’s largest companies could raise £7 billion in tax annually.
13. Reducing the annual exempt amount of capital gains a person might enjoy a year to £1,000 might raise at least £0.4 billion of additional tax
14. Charging capital gains tax on the final disposal of a person’s main residence might raise £10 billion of tax a year.
15. The UK needs to undertake tax spillover assessments if tax abuse is to be beaten.
16. Abolishing the inheritance tax exemption on some funds retained in pension arrangements at the time of a person’s death might raise £1.3 billion a year.
17. Reforming inheritance tax business property relief might raise £3.2 billion of tax a year.
18. Reforming inheritance tax agricultural property relief might raise £1.0 billion of tax a year.
19. Reforming Companies House might raise £6 billion of tax a year.
20. Reforming the rates at which inheritance tax is charged might make the tax considerably more progressive, even if it does not raise revenue.
21. Restricting charity tax reliefs to prevent their abuse is important to protect the charity sector from risk.
22. Reintroducing close company rules for income and corporation tax could raise at least £3 billion of tax a year
23. Abolishing the domicile rule for tax purposes might raise £3.2 billion of tax revenue a year.
24. Council tax reforms are essential to increase the progressivity of local taxation.
25. The reform of the use of ISA funds could result in the saving of at least £3.7 billion of tax subsidies a year and release £70 billion a year for investment in a UK Green New Deal
26. Reforming the conditions attached to pension tax relief could release £35 billion a year for investment in a UK Green New Deal
27. Reforming student taxation is required to create horizontal and vertical tax equity within our tax system and would cost £4 billion a year.
28. Removing existing anomalies within the UK system that prevent the delivery of tax justice might cost £19.1 billion per annum

You can delve into the rationale behind each one by clicking on the links.

FD

[1nvest]

The distinction between income and growth (or the stock of wealth) is an anachronism. The wealthy exploit this by paying 20% tax on wealth (ie crystallised capital gains) v 45% on income.

Reintroduction of indexation? Otherwise there's the disparity that immediate income tax versus deferred (inflated) gains would be disproportionate (unfavourable for capital gains/investments - which in turn reduces the tax-take).

A regular/immediate 'income' such as a wage might be taxed at around perhaps 40%, however that might be made up such as combined NI and income tax, whatever. If another invests £1 for 10 years sees that deflated by 4%/year inflation, but achieves a net 7% nominal gain (after costs/platform fees/stamp duty/fund managers fees/dividend taxes etc.) then the nominal value of the investment is near-as £2 value at the end of the 10 years (7% annualised net total return for 10 years). Sell and pay 20p capital gain tax on the £1 nominal gain (bought for £1, sold for £2 x 20% CGT). However the 4%/year inflation rate had £1 -> £1.48 real (inflation adjusted) value, so in real terms the tax rate = near 40%. 20p tax on a £2 - £1.48 = 52p real gain = 38.5%.

IIRC when indexation was dropped, so also was CGT reduced in reflection of the above. If the CGT tax rate was 40%, 40p on the 52p real gain = 77% real tax rate. Along with the the other costs/dividend taxes ...etc also paid along the way, and investing in the UK would largely disappear elsewhere.

[MuddyBoots]

The distinction between income and growth (or the stock of wealth) is an anachronism. The wealthy exploit this by paying 20% tax on wealth (ie crystallised capital gains) v 45% on income.

While we're examining income taxes what's the justification for dividend income being taxed lower than employment income? The explanation I heard during accountancy studies was to encourage entrepreneurship although the rates have converged a bit since then.

Or even corporation tax compared with income tax? Why aren't rates aligned for companies and people? Probably to avoid them shopping around and emigrating to a lower tax country which people are less inclined to do.

The whole thing looks like it's run on pragmatic, rather than equitable lines.

[scrumpyjack]

The distinction between income and growth (or the stock of wealth) is an anachronism. The wealthy exploit this by paying 20% tax on wealth (ie crystallised capital gains) v 45% on income.

While we're examining income taxes what's the justification for dividend income being taxed lower than employment income? The explanation I heard during accountancy studies was to encourage entrepreneurship although the rates have converged a bit since then.

Or even corporation tax compared with income tax? Why aren't rates aligned for companies and people? Probably to avoid them shopping around and emigrating to a lower tax country which people are less inclined to do.

The whole thing looks like it's run on pragmatic, rather than equitable lines.

Because the dividend income is paid out of corporate income that has already paid corporation tax. The combined tax rate is similar or somewhat higher when CT is at 25%

[JohnB]

The argument is that dividend tax is applied after corporation tax. So an investor is being taxed more for contributing their capital to an organisation than their labour.

[Alaric]

The argument is that dividend tax is applied after corporation tax.

You have to throw one person service companies into the mix. The person in charge has the choice between taking income out of the Company as dividend which is paid after Corporation Tax or as salary which is an expense against Corporation Tax but taxable in the hands of the recipient at a higher rate than dividends.

[Lootman]

If you want another take on wealth taxes, then here is Richard Murphy's shopping list:

https://taxingwealth.uk/2023/09/13/the- ... ted-value/

The following recommendations have been made so far and will go on to form part of the Taxing Wealth Report 2024:

1. Restricting pension tax relief to the basic rate of income tax might raise £14.5 billion of additional revenue per annum.
2. Abolishing the VAT exemption for financial services within the UK might raise £8.7 billion of additional tax revenue per annum.
3. Reforming national insurance charges on higher levels of earned income in the UK might raise an additional £12.5 billion of tax revenue per annum.
4. Aligning capital gains tax and income tax rates in the UK might raise more than £12 billion in additional tax a year.
5. Abolishing capital gains tax entrepreneur’s relief, which might raise approximately £2.2 billion of additional tax a year.
6. Recreating an investment income surcharge in the UK tax system might raise up to £18 billion of extra tax revenue a year.
7. Capping the rate at which tax relief is given on charitable donations under Gift Aid might raise £740 million in tax a year
8. Abolishing the VAT exemption for services supplied by private schools might raise £1.6 billion in tax a year
9. The UK needs better estimation of its tax gap to prevent the illicit accumulation of wealth. No tax estimate has been made as part of this recommendation.
10. Capping ISA contributions to £100,000 in a lifetime might raise £100 million in tax a year.
11. Reforming the administration of corporation tax in the UK might raise at least £6 billion of tax a year.
12. Increasing the corporation tax rate for the UK’s largest companies could raise £7 billion in tax annually.
13. Reducing the annual exempt amount of capital gains a person might enjoy a year to £1,000 might raise at least £0.4 billion of additional tax
14. Charging capital gains tax on the final disposal of a person’s main residence might raise £10 billion of tax a year.
15. The UK needs to undertake tax spillover assessments if tax abuse is to be beaten.
16. Abolishing the inheritance tax exemption on some funds retained in pension arrangements at the time of a person’s death might raise £1.3 billion a year.
17. Reforming inheritance tax business property relief might raise £3.2 billion of tax a year.
18. Reforming inheritance tax agricultural property relief might raise £1.0 billion of tax a year.
19. Reforming Companies House might raise £6 billion of tax a year.
20. Reforming the rates at which inheritance tax is charged might make the tax considerably more progressive, even if it does not raise revenue.
21. Restricting charity tax reliefs to prevent their abuse is important to protect the charity sector from risk.
22. Reintroducing close company rules for income and corporation tax could raise at least £3 billion of tax a year
23. Abolishing the domicile rule for tax purposes might raise £3.2 billion of tax revenue a year.
24. Council tax reforms are essential to increase the progressivity of local taxation.
25. The reform of the use of ISA funds could result in the saving of at least £3.7 billion of tax subsidies a year and release £70 billion a year for investment in a UK Green New Deal
26. Reforming the conditions attached to pension tax relief could release £35 billion a year for investment in a UK Green New Deal
27. Reforming student taxation is required to create horizontal and vertical tax equity within our tax system and would cost £4 billion a year.
28. Removing existing anomalies within the UK system that prevent the delivery of tax justice might cost £19.1 billion per annum

28 fetishistic ideas for raising taxes but not a word about what the money is for!

One telltale sign that an agenda is fuelled more by envy and spite than genuine need is when higher taxes are proposed solely for their own sake. As if being meted out as a punishment for success, rather than discuss first what the money is for, whether that is justified and how much is needed.

The same observation applies to AndrewinDevon's post above.

[scrumpyjack]

One saving of taxpayers money would be for left wing pressure groups such as Mr Murphy's not to be allowed charitable status.