Wealth tax academic paper

[GrahamPlatt]

Yes, income tax, as I recall, was only meant to be temporary, to pay the cost of the Napoleonic wars. Not averse to contributing myself, just provided it’s done in a fair, transparent manner. It’ll be far too complex to administer though if it’s going to involve ALL wealth. Just how would you get proper valuations - everyone having to go through the equivalent of a probate investigation? I’m aware that there are continental countries which have forms of wealth tax, the one I know of being an additional 0.15% (or was it 0.75%) tax on stock holdings of >€500k. Relatively simple that.

[GrahamPlatt]

The grauniad article says 6% of the UK population has >£1m in assets, 1% > £2m. So I can see there being a swift re-allocation of wealth between the generations for 5% of the UK if this becomes a serious threat.

[neversay]

Why can't one rec. articles on this board?

This "The Economy" board is a subset of Polite Debate & Discussion which tend to be fairly entrenched political/moral/etc, and some Fool users do not want to peer into this abyss, and so there is a function somewhere in the User Control Panel that allows them to enable/disable their own access to the depths. Therefore the Rec function is also disabled down in the dungeons here so that they cannot inadvertently become drawn down here by looking for highly recced posts as a trail of breadcrumbs to an interesting topic. Basically some Fools wanted to be protected from the trench warfare down here, to the point of not even knowing that there might be conflict in the depths. Hence no Recs.

regards, dspp

I'm one of those Fools. I nearly composed a response to the OP but decided I was procrastinating.

So I'm back here procrastinating again to go for 'the man not the ball' of another report authored by lifelong academics and quangocrats rather than entrepreneurs and business people. I say that because the premise of Big State spending, borrowing and taxation has gone too far.

Having just watched a friend liquidate his successful business and make 50 people unemployed, I don't want reports about State re-distribution of wealth to continue its bureaucratic burden and desperately poor spending decisions of 'other people's money'.

I want civil servants to have more 'skin in the game' as the consequences of their performance and failures. Like those responsible for reprehensible failures at my local hospital and the cover-ups that ensued while paying millions in damages. I want to see people fired and prosecuted.

I want a smaller state with fairer rules, level playing fields, accountability and responsibility. I want fewer incestuous so-called 'academics' who have no experience of real-world risk-taking and generate so-called 'impact factor' outputs for citations that contribute little to knowledge other than furthering their ideological activism. Like their civil service, quango, crony corporate friends, root out all the backscratching, bauble awarding, [expletive deleted] frauds and hangers-on.

Give me innovators, risk-takers, strivers and wealth creators with skin in the game who know what the cold-sweats feel like. Let value flow best through those who are best-placed to make the decisions rather than some bureaucrat who leaves work at 4pm and complains that he could earn more in the private sector (but never could).

I'll go up to one of the other layers of hell now. Give me the fourth circle over the eighth circle any day.

There, said it.

[Lootman]

The grauniad article says 6% of the UK population has >£1m in assets, 1% > £2m. So I can see there being a swift re-allocation of wealth between the generations for 5% of the UK if this becomes a serious threat.

Yes, such a tax will certainly give birth to all kinds of avoidance schemes, not to mention outright evasion. The "dumping my wealth onto my kids" early inheritance idea is just one of the simpler ones.

And sums like £1 million or £2 million in assets really isn't a lot these days. Anyone who owns a house in a big chunk of southern England is probably worth a million from that alone, before you take into account ISAs, pensions, collectables etc. Especially if you live in London, a net worth of £2 million won't make you feel wealthy even if the Guardian says that you are.

As for the mooted idea that £500,000 makes you wealthy, phul-eeze.

[Bouleversee]

Quite. Such a tax would not take account of the difference in house prices between the SE and other parts of England, and widows/widowers would be penalised. To penalise the old in this way would not take account of what they are having or will have to pay for care which is extremely expensive, the reason why my late husband would not let me give more away to my children; now it is probably too late because of the silly 7 year rule.

How do they know this is a once-in-a-lifetime event? I think it is quite likely that similar catastrophies could occur before long because of climate changes. Governments must learn to think ahead. There has been huge waste of money because of lack of preparedness.

[NeilW]

There is no need for any increase in taxation or tax rates at this point, or for the foreseeable future.

Taxation as an amount will increase as economic activity increases, because that's how percentages work. It is an automatic stabiliser. It's supposed to be weak at the moment. That's sort of the point.

You can tell when taxes need to rise when we have run out of people who are without work that want it, and people short of work.

Until then, why do we want to swap the voluntary taxation of saving, for compulsory taxation. That used to be a Marxist obsession.

[scrumpyjack]

It's academic at present anyway as I understand the Treasury have rejected the idea. Despite the claims of the paper it is impractical to do this in a fair an equitable way. Even Denis Healey rejected a wealth tax as impractical many decades ago. Many, probably most, payers of such a tax would not have the cash to pay it, so would have to pay out of income by instalments. They would then spend less, reducing economic activity. Imagine the stink if all those public sector pension rights were fairly valued at what it would cost to buy those rights, and then 5% of that demanded in cash! That is one of the lesser problems, there are so many others it isn't worth exploring them. These left wing academics are completely devoid of common sense!

[JohnB]

In a world where capitalism values rare skills highly, money flows strongly to a few. It is a key role of government to reverse that flow through taxation, its a question of how to impose that taxation fairly with low overheads and possibility of evasion. An ongoing annual wealth tax would struggle with overheads and evasion, but a one-off tax does pretty well.

Income tax captures wealth transfer in one form, but capital gains tax and inheritance tax capture wealth transfer in another form very badly, as they are full of exceptions, caveats and inconsistencies. At least a new tax could be defined more cleanly.

Wealth is wealth. You can't start adding caveats as to how its held, as every caveat reduces collection efficiency and increases unfairness. The housing market rise has produced a huge inter-generational transfer of wealth from young to old, North to South, not based on any skill, just the luck of being there first. Introducing emotional elements about cash poor grannies obscures the issue, and the authors of the report cover how such problems could be managed.

You have 3 choices with the cost of the pandemic: 1) let people starve 2) help them and everyone bears the burden through inflation 3) help them and selectively adjust the burden through changing taxation.

[scrumpyjack]

Taxation generally tries to grab a share of money as it moves but does not try to grab a share of theoretical wealth when there is no cash flow. Another guiding principle of tax is ‘pluck the feathers from the goose’ so as to take the maximum amount with the minimum of hissing, and certainly not to damage the health of the goose being plucked.
We already have a number of wealth taxes (IHT, CGT with no allowance for inflation etc). The devaluing of the national debt by way of inflation is a huge wealth tax and given the confetti printing of money is likely to continue to be the largest element of reducing the national debt as a proportion of GDP, as it was after the war. The wealthy already pay a huge proportion of the taxes raised and will continue to do so. Nobody is arguing that there is anything wrong with that, and that is the best way to proceed for the future.
But there is no way the proposed 5% one off wealth tax can be done fairly so that ALL wealth bears its fair share, and there is so much scope for the laws of unintended consequences to have catastrophic results for the economy that I think it is an idiotic proposal.
We live in an increasingly mobile world and we should certainly not go off half cock with such a proposal without first seeing how other countries propose to tackle their debt.
We are told that this is a once in a hundred years event, so if it cost £300 bn, £3 bn a year is the extra cost of it. Real interest rates are strongly negative so that is a reasonable cost estimate. But let’s be prudent and maybe up taxes by £5bn a year to deal with it?

[dspp]

It seems to me from reading the comments here that very few have either read much Piketty ("Capital in the 21st Century"), or strongly disagree with his conclusions regarding the accumulation of wealth and its increasing concentration.

http://piketty.pse.ens.fr/files/Piketty2015AER.pdf
https://en.wikipedia.org/wiki/Capital_i ... st_Century
https://www.hup.harvard.edu/features/ca ... ction.html

Everyone who is claiming that wealth "can't be taxed" is plain wrong - it can be taxed, and in many places (including UK) it is taxed. However as this report's authors point out, the UK's existing wealth taxes are flawed (which is largely due to deliberate political choices), as indeed are many of the other wealth taxes out there in various countries. The clamour against, and the plea for immediate special dispensations, are proof that such a tax could be implemented and could be effective. That is exactly what is feared.

As to whether wealth should be taxed, that is a different matter. However at the very least be honest about what you are saying, because ordinarily (in my opinion) it is simple personal greed, i.e. lack of compassion; combined with a misunderstanding of the role of chance in ones own accumulation of wealth vs others, i.e. lack of understanding.

For those of you who have not already done so, I recommend taking the time and effort to read Piketty. For those of you who have, well done !

regards, dspp

[GrahamPlatt]

OK, I’m sure this must have been posted before, an aphorism (possibly; see definition of aphorism) about paying tax. It’s wrongly attributed to a certain David R Kamerschen, who is (really) an American professor of economics. So I searched for his name here using TLFs search function: “The following words in your search query were ignored because they are too common words: kamerschen.” Really?

Anyway, in case anyone hasn’t heard it:

Ten men go out for beer. The bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing. The fifth would pay $1. The sixth would pay $3. The seventh would pay $7. The eighth would pay $12. The ninth would pay $18. The tenth man (the richest) would pay $59.
So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. He said, "Since you are all such good customers, I'm going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80."
The group still wanted to pay their bill the way we pay our taxes, so the first four men were unaffected. They would still drink for free. But what about the other six men -- the paying customers?
How could they divide the $20 windfall so that everyone would get his "fair share"? They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay!
And so:
The fifth man, like the first four, now paid nothing (100% savings). The sixth now paid $2 instead of $3 (33%savings). The seventh now pay $5 instead of $7 (28%savings). The eighth now paid $9 instead of $12 (25% savings). The ninth now paid $14 instead of $18 (22% savings). The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four
continued to drink for free. But once outside the restaurant, the men began to compare their savings.
"I only got a dollar out of the $20," declared the sixth man. He
pointed to the tenth man, "but he got $10!"
"Yeah, that's right,' exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than I!"
"That's true!!"shouted the seventh man. "Why should he get $10 back when I got only $2 ? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!" The nine men surrounded the tenth and beat him up.
The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important.
They didn't have enough money between all of them for even half of the bill!
And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up any more. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

[Gengulphus]

OK, I’m sure this must have been posted before, an aphorism (possibly; see definition of aphorism) about paying tax. It’s wrongly attributed to a certain David R Kamerschen, who is (really) an American professor of economics. So I searched for his name here using TLFs search function: “The following words in your search query were ignored because they are too common words: kamerschen.” Really?

If you'd read on one further line, I think you'd have found "You must specify at least one word to search for. Each word must consist of at least 3 characters and must not contain more than 9 characters excluding wildcards." - so apparently all words of 10 or more letters are too common...

Except: when I repeated your search for "kamerschen", it gave me a result, namely your post - but when I tried searching for a made-up 10-letter word, I got the message you did. So it seems to actually be the case that all words of 10 or more letters which have never been used in a TLF post are too common!

But more seriously, if you run into that problem, an alternative worth trying is to use Google to search for "kamerschen site:lemonfool.co.uk". It's got the problem that it may take some time after a post has appeared on TLF for Google to notice it - it didn't find any results when I tried it just now - but it's a useful technique when one runs into the deficiencies of TLF search.

Gengulphus

[PinkDalek]

O/T

... But more seriously, if you run into that problem, an alternative worth trying is to use Google to search for "kamerschen site:lemonfool.co.uk". It's got the problem that it may take some time after a post has appeared on TLF for Google to notice it - it didn't find any results when I tried it just now - but it's a useful technique when one runs into the deficiencies of TLF search.

Continuing O/T but I was under the impression that recently making Polite Debate & Discussion subscriber only was part and parcel of also making it non indexable by Google & other bots. If that is correct, Google shouldn’t be picking up anything posted at ‘The Economy’ in recent times.

I haven’t tested though.

[Steveam]

Several of the posters above have clearly not bothered to even read the first half dozen pages of the report - really rather poor to comment in reaction to the very idea of a wealth tax or a newspape summary when one can read the source. Some of the issues raised above are addressed in the paper. I'm about a quarter of the way through and it seems quite solid. It goes to great length to consider the different issues raised by an annual or one off wealth tax, (Despite the rather Pavlovian reaction implying that all one off taxes become permanent the authors remind us of other one off taxes which have remained one off).

In general I agree with dspp's comments above. I stand to pay a very large sum if there were a one off wealth tax but would happily pay it if implented as described in the paper (no exemptions, no time for people to move money, set with a lowish threshold).

Best wishes,

Steve

[Dod101]

In general I agree with dspp's comments above. I stand to pay a very large sum if there were a one off wealth tax but would happily pay it if implented as described in the paper (no exemptions, no time for people to move money, set with a lowish threshold).

Subject to what Steveam calls 'a very large sum' I would not pay it happily but I do understand what he means. I would pay it very unhappily; any sum frankly. That is a purely socialist way of looking at how to finance our country. Why the f***k should I be paying for all those who cannot be bothered to make the effort? I cannot believe that would be right.

Dod

[Gengulphus]

In general I agree with dspp's comments above. I stand to pay a very large sum if there were a one off wealth tax but would happily pay it if implented as described in the paper (no exemptions, no time for people to move money, set with a lowish threshold).

I too would stand to pay a very large sum, and I definitely wouldn't be happy about having to pay it, but yes, implementing it as described in the paper goes a long way towards making it acceptable - though still definitely unwelcome!

But what are the chances of it being implemented as described in the paper? I'd say they're basically zero... Having no exemptions (other than the 'low-value chattels' exemption described in the paper) seems very unlikely to survive all the lobbying by special interest groups that would be likely to occur, and I'd say that the chances of government plans to implement such a wealth tax not 'leaking' so that those in the know do have time to move money are even lower...

Gengulphus

[Steveam]

@Gengulphus: Ay, there’s the rub! (Dear Hamlet, such a troubled boy)

Best wishes,

Steve

[dealtn]

In a world where capitalism values rare skills highly, money flows strongly to a few. It is a key role of government to reverse that flow through taxation...

Really. Why? Who says so?

[absolutezero]

In general I agree with dspp's comments above. I stand to pay a very large sum if there were a one off wealth tax but would happily pay it if implented as described in the paper (no exemptions, no time for people to move money, set with a lowish threshold).

Subject to what Steveam calls 'a very large sum' I would not pay it happily but I do understand what he means. I would pay it very unhappily; any sum frankly. That is a purely socialist way of looking at how to finance our country. Why the f***k should I be paying for all those who cannot be bothered to make the effort? I cannot believe that would be right.

Dod

Then these posters should put their money where their mouth is. Now.

Get your cheque book out and write a cheque for HMRC for as much as you are 'happy' to pay and tell them it is a voluntary tax donation.
This is possible under the tax system and they will send a receipt.
Don't link it to your personal tax account or they will adjust your tax to take it into account - and you are 'happy' to pay more so you don't want that obviously...

Please post your receipts on here when you have done it. Thanks.

[dspp]

In general I agree with dspp's comments above. I stand to pay a very large sum if there were a one off wealth tax but would happily pay it if implented as described in the paper (no exemptions, no time for people to move money, set with a lowish threshold).

Subject to what Steveam calls 'a very large sum' I would not pay it happily but I do understand what he means. I would pay it very unhappily; any sum frankly. That is a purely socialist way of looking at how to finance our country. Why the f***k should I be paying for all those who cannot be bothered to make the effort? I cannot believe that would be right.

Dod

Then these posters should put their money where their mouth is. Now.

Get your cheque book out and write a cheque for HMRC for as much as you are 'happy' to pay and tell them it is a voluntary tax donation.
This is possible under the tax system and they will send a receipt.
Don't link it to your personal tax account or they will adjust your tax to take it into account - and you are 'happy' to pay more so you don't want that obviously...

Please post your receipts on here when you have done it. Thanks.

No. Everyone does it together or not at all. That is the whole basis of the proposal.

regards, dspp