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Wealth tax academic paper

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Re: Wealth tax academic paper

#368030

Postby scrumpyjack » December 20th, 2020, 2:10 pm

and of course when that wealth moves out of the UK, it is not just the 5% tax that the UK loses, it is 100% of all future tax revenues from that wealth. That is why very high tax rates are counter productive. President Hollande found this when the likes of Gerard Depardieu left France and there were worries Bernard Arnault might do the same. Don't think I would choose Russia though, as Depardieu did (not that I'm in that league financially!)

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Re: Wealth tax academic paper

#372651

Postby Steveam » January 3rd, 2021, 1:14 pm


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Re: Wealth tax academic paper

#372691

Postby dealtn » January 3rd, 2021, 2:45 pm

Steveam wrote:https://www.theguardian.com/inequality/2021/jan/03/richest-1-have-almost-a-quarter-of-uk-wealth-study-claims


Suggests it's even more important not to introduce anything that will lead to that "quarter" going elsewhere.

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Re: Wealth tax academic paper

#372959

Postby SimonS » January 4th, 2021, 11:34 am

Having read the paper, I find that the solution reads more as an excuse for their findings than a justification.

Firstly the findings are hugely age discriminative, they admit that the biggest source of wealth that is going to be taxed is property and that the people who are going to be taxed are those who have paid off their mortgages. They repeat the old canard about pensioners rattling around in houses that are too big for them. One notes that a previous recommendation by the IFS was that pensioners should be moved into homes of 1500 sq foot to free up bigger houses for 'the young'

Secondly they ignore the true effect of CGT. The true 'profit' of CGT for the Government lies in the fact that it ignores inflation. it quotes the highest rate of CGT as being 28%, but if you have held the asset for a year (at the average 2% for most years up to 2020) then the true rate of Tax is in fact 30%
and if you have held the asset for 10 years then the effective rate of tax is round 45%, the cumulative effect as we are so often told cumulative returns.

Thirdly the cost of adminstering the tax seems absurdly low at £500 million, since the cost of the Brexit referendum is estimated to have cost around £145 million.

Fourthly, the system has not addressed the issue of equity release (except to encourage it as a method to pay off your wealth tax for the asset rich cash poor ; who are assumed to have 'access to commercial forms of capital").

Additionally, the lesson to be learned from this is that "consumerism is good", If you are hugely indebted and taken equity out of your house and consumed it you are less likely to be taxed than if you have made savings.

As for the standard recommendation that you should save 20% of your income for the future and particularly retirement, well once there has been one wealth tax (one off to pay for Covid) then there will obviously need to be another one next to pay off the costs of Brexit if/ when it fails to meet the expectations of a land flowing with milk and honey., and then one meet the costs of the next pandemic, coming within the next 5 years. Why bother to save when you know the Government will take from the 'rich' to pay for profligacy and unpreparedness.

This is all about pandering to the memes of the young, while the report admits that during their surveys many, if not most, of those surveyed did not understand what the survey was about, yet uses that flawed information as a justification for their recommendations. In common with common practice today it relies on 'fake news' to support itself, relying on the apathy, ignorance or populism of its intended audience for apparent credibility. So you can expect the current crew (got your gong "for supporting Brexit" yet?)of politicians to lap it up.

Next the Prime Minister will be employing a lot more Government employees, to manage the unemployment crisis

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Re: Wealth tax academic paper

#372967

Postby dealtn » January 4th, 2021, 11:55 am

SimonS wrote:
Additionally, the lesson to be learned from this is that "consumerism is good", If you are hugely indebted and taken equity out of your house and consumed it you are less likely to be taxed than if you have made savings.



How does "consumerism" and paying VAT at 20% compared against saving and paying a potential 5% wealth tax show the spender is less likely to be taxed?

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Re: Wealth tax academic paper

#372987

Postby NeilW » January 4th, 2021, 12:21 pm

Lootman wrote: The UK loses the wealth tax it would have levied on that wealth


How does it? If the UK wishes to raise X amount in "wealth tax" to eliminate the Gilts it is concerned about, then it just levies that pro-rata on the wealthy. You shuffling stuff around may change the distribution a bit between you and other wealthy people, but it won't alter the total amount raised, since the UK will simply adjust the rate until it gets what it requires.

And which then has to be delivered to the Consolidated Fund in liabilities of the Bank of England - and nothing else. Because that's what they law says you have to deliver - or be jailed and have your assets confiscated. The liabilities of the Bank of England can't go anywhere else. They are the ultimate closed system, and you, or your agents, have to acquire them to discharge the tax you owe.

Once again you are thinking in individual terms, not in aggregate. The UK doesn't care about individuals. It cares about the aggregate.

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Re: Wealth tax academic paper

#373030

Postby Lootman » January 4th, 2021, 3:03 pm

NeilW wrote:
Lootman wrote: The UK loses the wealth tax it would have levied on that wealth

How does it? If the UK wishes to raise X amount in "wealth tax" to eliminate the Gilts it is concerned about, then it just levies that pro-rata on the wealthy. You shuffling stuff around may change the distribution a bit between you and other wealthy people, but it won't alter the total amount raised, since the UK will simply adjust the rate until it gets what it requires.

And which then has to be delivered to the Consolidated Fund in liabilities of the Bank of England - and nothing else. Because that's what they law says you have to deliver - or be jailed and have your assets confiscated. The liabilities of the Bank of England can't go anywhere else. They are the ultimate closed system, and you, or your agents, have to acquire them to discharge the tax you owe.

Once again you are thinking in individual terms, not in aggregate. The UK doesn't care about individuals. It cares about the aggregate.

Yes, the discussion is about the effect of a wealth tax on the behaviour of individuals and, as noted, wealth will flee if it starts being taxed, leading to a reduction in the amount of wealth being available to be taxed in that way.

Could the government respond to that as you suggest by increasing the rate of wealth tax, or increasing other taxes? Of course. But that will have the effect of driving more wealth elsewhere, or otherwise reducing economic activity in general. And the whole thing becomes a vicious vortex of fiscal decline.

Higher taxes is not a free lunch for the government.

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Re: Wealth tax academic paper

#373042

Postby NeilW » January 4th, 2021, 3:32 pm

Lootman wrote:Yes, the discussion is about the effect of a wealth tax on the behaviour of individuals and, as noted, wealth will flee if it starts being taxed, leading to a reduction in the amount of wealth being available to be taxed in that way.


That's the fallacy of composition. There is no reduction. Just a change in the calculation that alters the distribution.

While you remain domiciled here the UK authorities can raise a charge on your world wide ownership.

But that will have the effect of driving more wealth elsewhere, or otherwise reducing economic activity in general.


Very difficult to move those buildings abroad, or anything else physical - since that leaves a record. And that would be evasion. Pretty much anything else requires an exchange, which just means somebody else owning the item.

The notion of exporting 'wealth' is another of those illusions that turns out to be rather more challenging than it seems. A bit like "moving abroad".

And none of it reduces the capacity of the UK to invest in whatever it wishes by one single penny.

Higher taxes is not a free lunch for the government.


Wealth taxes are a waste of time, unnecessary and counter productive. As I have said several times. However that doesn't mean they can't happen.

And as we have seen throughout this crisis government can replace 'economic activity'. It's that replacement that has triggered this insanity of discussing wealth taxes in the first place.

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Re: Wealth tax academic paper

#373047

Postby Lootman » January 4th, 2021, 3:43 pm

NeilW wrote:While you remain domiciled here the UK authorities can raise a charge on your world wide ownership.

I do not see how domicile comes into it. UK taxes are based on residency, except for IHT and even there the tax is often not collected if the deceased lived and died overseas.

NeilW wrote:Very difficult to move those buildings abroad, or anything else physical - since that leaves a record. And that would be evasion.

I already noted that real property and pensions are a problem to relocate. Other forms of wealth can be moved. So another outcome from a wealth tax would be people liquidating some kinds of assets into more mobile assets.

Whether it is evasion or mere avoidance depends on the circumstances. Why incentivise either?

NeilW wrote:Wealth taxes are a waste of time, unnecessary and counter productive.

There we agree.

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Re: Wealth tax academic paper

#373053

Postby dealtn » January 4th, 2021, 3:52 pm

NeilW wrote:
Lootman wrote:Yes, the discussion is about the effect of a wealth tax on the behaviour of individuals and, as noted, wealth will flee if it starts being taxed, leading to a reduction in the amount of wealth being available to be taxed in that way.


That's the fallacy of composition. There is no reduction. Just a change in the calculation that alters the distribution.

While you remain domiciled here the UK authorities can raise a charge on your world wide ownership.

But that will have the effect of driving more wealth elsewhere, or otherwise reducing economic activity in general.


Very difficult to move those buildings abroad, or anything else physical - since that leaves a record. And that would be evasion. Pretty much anything else requires an exchange, which just means somebody else owning the item.

The notion of exporting 'wealth' is another of those illusions that turns out to be rather more challenging than it seems. A bit like "moving abroad".

And none of it reduces the capacity of the UK to invest in whatever it wishes by one single penny.

Higher taxes is not a free lunch for the government.


Wealth taxes are a waste of time, unnecessary and counter productive. As I have said several times. However that doesn't mean they can't happen.

And as we have seen throughout this crisis government can replace 'economic activity'. It's that replacement that has triggered this insanity of discussing wealth taxes in the first place.


What you are missing is there is a difference between "wealth" and the nominal total value of £ in your closed economy. To others they can see that sellers of assets (ultimately £s as you describe) might progressively be swapping those for other assets (in non-£s).

The first transaction might be someone swapping £1 for $2, then $1.99, then $1.98 ..... until £1 for 0.1$. All the time you will have a balanced system, but (relative) wealth will be something else.

Now if all these progressively cheaper buildings and physical assets attract overseas investors they may stay viable, but its possible, if not they will physically become depleted and worth less too.

Your closed £ system, is seen as an open one to others, with respect to real assets, real capital and even real labour.

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Re: Wealth tax academic paper

#373054

Postby NeilW » January 4th, 2021, 3:57 pm

Lootman wrote:I do not see how domicile comes into it.


If you're not domiciled you have the choice of remittance for tax. Probably wouldn't make a difference for most people.

Lootman wrote: Other forms of wealth can be moved. So another outcome from a wealth tax would be people liquidating some kinds of assets into more mobile assets.


You can only liquidate if there is a counterparty - and they then take you place. And it all leaves a record, which would be evasion. Very difficult to move things physically around without a record.

Lootman wrote:Whether it is evasion or mere avoidance depends on the circumstances. Why incentivise either?


No. It just depends on the law - and a general anti-avoidance rule would stop any argument on the matter.

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Re: Wealth tax academic paper

#373061

Postby NeilW » January 4th, 2021, 4:07 pm

dealtn wrote:What you are missing is there is a difference between "wealth" and the nominal total value of £ in your closed economy. To others they can see that sellers of assets (ultimately £s as you describe) might progressively be swapping those for other assets (in non-£s).

The first transaction might be someone swapping £1 for $2, then $1.99, then $1.98 ..... until £1 for 0.1$. All the time you will have a balanced system, but (relative) wealth will be something else.

Now if all these progressively cheaper buildings and physical assets attract overseas investors they may stay viable, but its possible, if not they will physically become depleted and worth less too.

Your closed £ system, is seen as an open one to others, with respect to real assets, real capital and even real labour.


The £ system is closed. You have to deliver BoE liabilities to the Consolidated Fund to clear your tax liabilities. If you are here you have to obtain them to pay your tax. How do currency prices go down, when there is a clear an present demand for it? If I have £s and you are stuck with $s and a tax bill, I'm going to asking an awful lot more than $0.1 for them that you need to avoid going to jail.

To swap with anybody else you have to have somebody coming in the opposite direction, who then takes your place. Why are they doing that? There has to be a reason.

And for one currency to go to zero *all* the other currencies in the world have to go to infinity. Which if you are exporting to that country is a disaster for your economy. So you tell your central bank to hoover up the 'spare' currency. Any central bank in the world can do that and will stabilise it for everybody.

There is only one world. You can't go anywhere else. Planet Earth is closed. If you believe things are open, then that just tells you you haven't analysed the feedback loops fully - particularly with large economies.

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Re: Wealth tax academic paper

#373067

Postby Lootman » January 4th, 2021, 4:20 pm

dealtn wrote:What you are missing is there is a difference between "wealth" and the nominal total value of £ in your closed economy. To others they can see that sellers of assets (ultimately £s as you describe) might progressively be swapping those for other assets (in non-£s).

The first transaction might be someone swapping £1 for $2, then $1.99, then $1.98 ..... until £1 for 0.1$. All the time you will have a balanced system, but (relative) wealth will be something else.

Now if all these progressively cheaper buildings and physical assets attract overseas investors they may stay viable, but its possible, if not they will physically become depleted and worth less too.

Your closed £ system, is seen as an open one to others, with respect to real assets, real capital and even real labour.

Yes, Neil has a very odd way of looking at this. I feel sure he is correct in some abstract, academic way. But in practice jacking up taxes, be it on wealth or anything else, has very distinct outcomes that are generally negative to the country doing it.

We perhaps saw this most clearly in the 1950's, 1960s and 1970s when, with tax rates as high as 98%, we saw a "brain drain", the exile of many of who were successful, exchange controls to try and stem the exodus of capital, and other unfortunate but inevitable side-effects. Thatcher stopped most of that by doing the exact opposite of what is being proposed here.

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Re: Wealth tax academic paper

#373082

Postby dealtn » January 4th, 2021, 4:46 pm

NeilW wrote:
dealtn wrote:What you are missing is there is a difference between "wealth" and the nominal total value of £ in your closed economy. To others they can see that sellers of assets (ultimately £s as you describe) might progressively be swapping those for other assets (in non-£s).

The first transaction might be someone swapping £1 for $2, then $1.99, then $1.98 ..... until £1 for 0.1$. All the time you will have a balanced system, but (relative) wealth will be something else.

Now if all these progressively cheaper buildings and physical assets attract overseas investors they may stay viable, but its possible, if not they will physically become depleted and worth less too.

Your closed £ system, is seen as an open one to others, with respect to real assets, real capital and even real labour.


The £ system is closed. You have to deliver BoE liabilities to the Consolidated Fund to clear your tax liabilities. If you are here you have to obtain them to pay your tax. How do currency prices go down, when there is a clear an present demand for it? If I have £s and you are stuck with $s and a tax bill, I'm going to asking an awful lot more than $0.1 for them that you need to avoid going to jail.

To swap with anybody else you have to have somebody coming in the opposite direction, who then takes your place. Why are they doing that? There has to be a reason.

And for one currency to go to zero *all* the other currencies in the world have to go to infinity. Which if you are exporting to that country is a disaster for your economy. So you tell your central bank to hoover up the 'spare' currency. Any central bank in the world can do that and will stabilise it for everybody.

There is only one world. You can't go anywhere else. Planet Earth is closed. If you believe things are open, then that just tells you you haven't analysed the feedback loops fully - particularly with large economies.


How do currency prices go down?

Sorry yes I must have got it wrong, they are fixed and stable and haven't moved for years as any FX graph will show me. Apologies.

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Re: Wealth tax academic paper

#373084

Postby NeilW » January 4th, 2021, 4:50 pm

dealtn wrote:
How do currency prices go down?

Sorry yes I must have got it wrong, they are fixed and stable and haven't moved for years as any FX graph will show me. Apologies.


Excluded middle arguments are beneath you.

It's not that currencies move, its that they don't go all the way to the bottom - which is what you were trying to imply. And they don't do that because it gets stopped by somebody who needs them to go the other way. As we saw for years every time the JPY got into nosebleed territory against the USD.

Exporters have to export.

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Re: Wealth tax academic paper

#373092

Postby dealtn » January 4th, 2021, 5:05 pm

NeilW wrote:
dealtn wrote:
How do currency prices go down?

Sorry yes I must have got it wrong, they are fixed and stable and haven't moved for years as any FX graph will show me. Apologies.


Excluded middle arguments are beneath you.

It's not that currencies move, its that they don't go all the way to the bottom - which is what you were trying to imply. And they don't do that because it gets stopped by somebody who needs them to go the other way. As we saw for years every time the JPY got into nosebleed territory against the USD.

Exporters have to export.


So we now go agree, so that "fixed £ wealth" could go down 10%? 20%? 50%? over time if enough people were sufficiently unimpressed with a (wealth) tax regime (or for other reasons) when measured in some other form, despite the £ nominal value of £s in the system remain the same.

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Re: Wealth tax academic paper

#373103

Postby NeilW » January 4th, 2021, 5:40 pm

dealtn wrote:So we now go agree, so that "fixed £ wealth" could go down 10%? 20%? 50%? over time if enough people were sufficiently unimpressed with a (wealth) tax regime (or for other reasons) when measured in some other form, despite the £ nominal value of £s in the system remain the same.


It isn't fixed. It is always relative. You can always shift to a net exporting nation to make it look like an import nation is "losing value". Right up to the point where that nation has an economic collapse due to lack of exports. Then you realise you're living in a monetary illusion.

The pound slumped to a 31 year low after the Brexit vote according to some reports. Yet the terms of trade went up. And ultimately nobody really noticed.

It's rather more complicated than the simplistic model you have in mind.

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Re: Wealth tax academic paper

#373107

Postby dealtn » January 4th, 2021, 5:56 pm

NeilW wrote:
dealtn wrote:So we now go agree, so that "fixed £ wealth" could go down 10%? 20%? 50%? over time if enough people were sufficiently unimpressed with a (wealth) tax regime (or for other reasons) when measured in some other form, despite the £ nominal value of £s in the system remain the same.


It isn't fixed. It is always relative. You can always shift to a net exporting nation to make it look like an import nation is "losing value". Right up to the point where that nation has an economic collapse due to lack of exports. Then you realise you're living in a monetary illusion.

The pound slumped to a 31 year low after the Brexit vote according to some reports. Yet the terms of trade went up. And ultimately nobody really noticed.

It's rather more complicated than the simplistic model you have in mind.


I got my first economics qualification 36 years ago, then another from the country's top university, and my final one from the country's leading business school.

25 years in the City and time spent starting and running businesses. I only sit on one Company Board now. But in general I am happy with the rather complicated model I use. I only revert to simplifications to make graspable points depending on the audience.

What is simple here is that a wealth tax (and other things) can damage the tax base leading to a relative decline in a country's wealth. That decline makes it harder to maintain that tax raising regime going forward. So much so that that a tax "increase" can actually over time become a "decrease".

(And that can all happen without a change in the number of £s in circulation).

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Re: Wealth tax academic paper

#373114

Postby NeilW » January 4th, 2021, 6:18 pm

dealtn wrote:I got my first economics qualification 36 years ago,


That's probably your problem then. And it's an appeal to authority - which holds no more weight than the previous attempt at an excluded middle.

Claimed credentials do not bolster an argument that holds no water.

What is simple here is that a wealth tax (and other things) can damage the tax base leading to a relative decline in a country's wealth. That decline makes it harder to maintain that tax raising regime going forward. So much so that that a tax "increase" can actually over time become a "decrease".


It can't because the accounting doesn't allow that. Nor does it cause a decline in a country's wealth because that is the stuff and people that physically stays here. Particularly the people that do the actual work.

A wealth tax does nothing more than reduce some numbers on an aggregate balance sheet. Completely pointlessly as I keep saying. However since those numbers are in Sterling, the UK government can reduce them if they see fit. Based upon whatever crazy calculation scheme they fancy.

It will neither increase, nor decrease their fiscal capacity.

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Re: Wealth tax academic paper

#373122

Postby dealtn » January 4th, 2021, 6:49 pm

NeilW wrote:
dealtn wrote:I got my first economics qualification 36 years ago,


That's probably your problem then. And it's an appeal to authority - which holds no more weight than the previous attempt at an excluded middle.

Claimed credentials do not bolster an argument that holds no water.

What is simple here is that a wealth tax (and other things) can damage the tax base leading to a relative decline in a country's wealth. That decline makes it harder to maintain that tax raising regime going forward. So much so that that a tax "increase" can actually over time become a "decrease".


It can't because the accounting doesn't allow that. Nor does it cause a decline in a country's wealth because that is the stuff and people that physically stays here. Particularly the people that do the actual work.

A wealth tax does nothing more than reduce some numbers on an aggregate balance sheet. Completely pointlessly as I keep saying. However since those numbers are in Sterling, the UK government can reduce them if they see fit. Based upon whatever crazy calculation scheme they fancy.

It will neither increase, nor decrease their fiscal capacity.


But people can (and do) leave, just as they arrive. The same is true of Capital.

Ultimately what makes up the wealth is Capital, Labour, and Technology progress (how those components can be combined). If Capital And Labour leave then what is left is not as much as before. It can be the same as measured in £s, they don't leave the system, it can remain as accounting balanced as you like, but in a measurement of wealth it will decline.

All the accounting does is allow the continuous matching of assets and liabilities in the units they are measured in. £s in this case. But If £=$2 or $1.5 or $1 you will have different measures of externally measured wealth.

So let's say we as a country, or government, occasionally source goods from elsewhere. Such as Defence, or Oil, or Pfizer vaccinations we need to pay for them in non-£. We can sell £s to others that are happy to buy them - buyers of our exports perhaps. But if $2 isn't the correct rate and the exchange goes to $1 each Pfizer jab is now costing us twice as much. No change in the number of £s. If we were previously selling 1 bottle of Whisky to buy a Covid jab we now have to sell 2.

We can try and become more competitive, pay our whisky workers less, make them work harder etc. But what if they decide they would rather work somewhere else, say USA. They can sell their assets, turn to $s and move to Texas, finding someone to buy their £s in the process (so that none disappear), but £1 might now only be $0.9999.

Eventually you could have 80% of the population that existed, say 10 years before. GDP per head could even be the same, but you will have a smaller economy, and if its the more productive Labour (and Capital) that goes GDP per head will fall too.

But that's ok if all you are concerned about is ensuring the same number of £s exist at all times, and that every asset has an associated liability to match with presumably.


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