Steveam wrote:Very interesting contributions. I think it is sensible to consider wealth taxes and the original paper makes a useful contribution to the discussion. It is not entirely clear to me that the government need to take (drastic) action to reduce the debt but if action is to be taken it will be a matter of degree ... some options, at some levels, are distinctly worse than others. And some options put the extra burden on broader shoulders but may be more damaging than others.
So, the authors make clear that they see a one off wealth tax as better than a long term wealth tax. I think their reasoning is sound. They also make clear that their proposed tax must be broad based and inescapable. Again, I think their reasoning is sound.
As regards being one-off and inescapable, I agree that their reasoning is sound - as far as it goes. But
their reasoning doesn't go far enough - it doesn't go as far as practical politics. In particular, as I and others have pointed out, their wish for it to be made inescapable simply isn't feasible - word of any plans being formed for such a tax is bound to leak, especially to those likely to face the largest wealth tax bills. And as others have pointed out, it's hard to see how such a wealth tax can be made genuinely one-off - if it happens, it will be a precedent for any occasions a government wants to raise a lot of tax in the future, and there will be such future occasions. About the only way I can see for it to happen and
remain one-off is for a government to somehow get it through but become hugely unpopular in the process, and I cannot see that happening without it being much more broad-based than it is. (As an example of how a tax can remain one-off, the poll tax in the 1990s did actually happen and made a big contribution to the Conservative government of the day becoming deeply unpopular - but it was basically aimed at taxing every adult in the country.)
As for being broad-based, using their definition ("By ‘broad-based’, we mean a tax on most (or all) types of asset, not only a specific type such as housing.
" on page 17 of their report), I agree that their reasoning is sound. But I strongly disagree with that definition, because I don't think a tax that can be expected to affect only about 7% of taxpayers (which is the figure on page 74 for the percentage of taxpayers who are above a wealth threshold of £500k) can reasonably be described as "broad-based"... I.e. their definition basically strikes me as spin, trying to imply to those who would be affected by their proposed wealth tax that a large proportion of the population would be affected. To avoid that spin, they need a more precise term, such as "all-asset-based" - though they probably don't want to avoid it... And again, their reasoning doesn't seem to have gone as far as practical politics: they say "Difficult as it may be, it is essential that the government resists any calls to exempt specific assets from the tax base of a one-off wealth tax.
" (page 49), but the chances of a government successfully resisting such calls are IMHO negligible, especially for types of asset that MPs and ministers are likely to own...