Wealth tax and the rich

[Gerry557]

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.

[clissold345]

Guardian Opinion column from Sept 2021:

"With our proposal, wealthier households would face increasing marginal rates, with only the top 1% (ie, those with accumulated wealth of more than £3.4m) paying anything at all. Household wealth between £3.4m and £5.7m would be taxed at 1%; between £5.7m and £18.2m at 5%; and above £18.2m at 10%. For example, this means that a household that owns £4m would only pay £6,000 a year – 1% of the £600,000 they own above the £3.4m cut off. Anyone below the £3.4m mark, would not pay an extra penny."

[scrumpyjack]

Guardian Opinion column from Sept 2021:

"With our proposal, wealthier households would face increasing marginal rates, with only the top 1% (ie, those with accumulated wealth of more than £3.4m) paying anything at all. Household wealth between £3.4m and £5.7m would be taxed at 1%; between £5.7m and £18.2m at 5%; and above £18.2m at 10%. For example, this means that a household that owns £4m would only pay £6,000 a year – 1% of the £600,000 they own above the £3.4m cut off. Anyone below the £3.4m mark, would not pay an extra penny."

Needless to say this would exclude the capital value of all those index linked DB pension schemes and the luvvies houses in Kensington and Primrose Hill!

[Hallucigenia]

ill 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?

You're just not going to get that level of detail before the election, that's just not how politics works. All they can do is kick around numbers that don't sound too scary before the election, then afterwards announce that reluctantly they have to cast the net wider due to the economic situation.

But the cutoff would probably be no more than £2m for it to be meaningful - 1%/year of a £2m cutoff would raise ~£16bn/year, about the equivalent of 2p on the basic rate of income tax. Reducing it to £500k would raise £48bn/year - which would at least replace the cost of Brexit to the taxbase.

That would be net, per person - so if a couple had a £1m mortgage on a house worth £2m, then the net wealth is £2m-£1m = £1m, and that £1m would be split between the two of them so they would pay nothing.

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.

The point of the tax is to catch all forms of wealth, so people pay the same regardless of transforming wealth into one form or another. So yes, all property, yes ISAs, yes to pension pots - but that's the kind of thing where what we don't know can be significant - one way to do it is for pension pots to be eligible but for the tax not to be paid until retirement, in recognition of the fact that that particular form of wealth is not accessible until retirement.

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.

Market value - none of this is new to HMRC who have to value stuff all the time for IHT and CGT purposes, they even have a dedicated office for the purpose, the Valuation Office Agency. And like Trump you may be caught out, if you value a £6k necklace at a penny and then sell for £10k, you become liable for CGT on £9999.99 rather than on £4k....

I strongly recommend you read this LSE report to get a better understanding of how it would work :
https://www.lse.ac.uk/International-Ine ... ortold.pdf

[bungeejumper]

Needless to say this would exclude the capital value of all those index linked DB pension schemes and the luvvies houses in Kensington and Primrose Hill!

I can't see how the luvvies' houses will escape taxation unless they're owned by some offshore operation in Switzerland or the Caribbean.

But yes, every kind of DB pension scheme would have to be included alongside DC schemes unless the government was prepared to start a civil war between those fortunate souls whose future has been secured at no risk to themselves, and the rest of us who've had to fight and finance our own way to retirement. The self-employed, who've never had any employer contributions either, will be doubly offended. And the resulting antipathy won't end well. Or indeed ever!

Of course, quite a lot of government DB schemes are unfunded, which means in effect that there won't be any cash on hand to pay a wealth tax levy, because there ain't any significant money of any description in the pot in the first place.

And that in turn will cause techncal insolvencies among an awful lot of public sector bodies. And some people will be surprised by that. About time, too.

BJ

[88V8]

....a house worth £2m....

And that will necessitate a current valuation of all personal property, an excellent springboard for revaluing Council tax.

And then, if it's a per person tax, the widow will suddenly become liable, shades of Theresa's 'dementia tax'.

Oh, the sin of being successful and what my Gran used to call being 'careful with money'. Labour, the party of envy.

V8

[the0ni0nking]

Spain has a wealth tax (well IIRC it has the legislation in place at a national level but then the devolved communities actually set the rates and collect).

I'll post more on it at a later time but there is I think an 800k Euros allowance for your primary residence as well as other generous reliefs.

Added to that is the fact that some regions such as Madrid and Andalusia set the rate at 0% / 100% allowance so no tax is due.

One thing I do recall when I looked at it was that in certain circumstances your pension asset would be included and in others it wouldn't. (I think from a UK perspective, if it's QROPS it can be excluded but if not its included).

For the Spanish this is all irrelevant as their own pensions would be excluded but for the ex pat community this could be a determining factor in which devolved community to reside in.

[Lootman]

the cutoff would probably be no more than £2m for it to be meaningful - 1%/year of a £2m cutoff would raise ~£16bn/year, about the equivalent of 2p on the basic rate of income tax. Reducing it to £500k would raise £48bn/year - which would at least replace the cost of Brexit to the taxbase.

1% of £2,000,000 is £20,000 per household, presumably annually. That is a huge increase and a huge amount, and would amount to the largest tax raid on families in one go that I can recall in my lifetime.

It would l suspect lead to a large exodus of capital and successful people from the UK and send a message that wealth creators and risk takers are not welcome here. Even the socialist UK governments of the mid-1900s never imposed such a tax and Starmer/Reeves have ruled it out for their government in waiting.

I am surprised that anyone is talking about it.

PS: Brexit costs £48 billion a year??!! Citation please!

[clissold345]

Money raised by a wealth tax could be used to reduce poverty. Here's a description of UK poverty in 2024:

https://www.jrf.org.uk/uk-poverty-2024- ... -in-the-uk

[Lootman]

Money raised by a wealth tax could be used to reduce poverty. Here's a description of UK poverty in 2024:

https://www.jrf.org.uk/uk-poverty-2024- ... -in-the-uk

You could raise any and every tax in the land and there would still be poverty. The only real difference that would make is to eradicate wealth rather than poverty. No doubt some of the envy mob would like that.

[clissold345]

You could raise any and every tax in the land and there would still be poverty. The only real difference that would make is to eradicate wealth rather than poverty. No doubt some of the envy mob would like that.

I didn't write "... eradicate poverty ...", I wrote "... reduce poverty ...".

[richlist]

Spain has a wealth tax (well IIRC it has the legislation in place at a national level but then the devolved communities actually set the rates and collect).

I'll post more on it at a later time but there is I think an 800k Euros allowance for your primary residence as well as other generous reliefs.

Added to that is the fact that some regions such as Madrid and Andalusia set the rate at 0% / 100% allowance so no tax is due.

One thing I do recall when I looked at it was that in certain circumstances your pension asset would be included and in others it wouldn't. (I think from a UK perspective, if it's QROPS it can be excluded but if not its included).

For the Spanish this is all irrelevant as their own pensions would be excluded but for the ex pat community this could be a determining factor in which devolved community to reside in.

we have property in the Valencian Community of Spain. The national allowance is, I think 700,000€ but in the Valencian Community the obligation to declare starts at 500,000€ since 2023, it's not difficult to exceed this limit.

[Lootman]

You could raise any and every tax in the land and there would still be poverty. The only real difference that would make is to eradicate wealth rather than poverty. No doubt some of the envy mob would like that.

I didn't write "... eradicate poverty ...", I wrote "... reduce poverty ...".

But we already reduce poverty through higher taxes. So the real issue is whether we should try and further reduce poverty through even higher taxes? And if so how do we know when to stop that endless process?

I am not a fan of the idea that nobody should be rich if anyone is still poor.

[SalvorHardin]

PS: Brexit costs £48 billion a year??!! Citation please!

It probably comes from the "Brexit reduced GDP 4%" figure that got a lot of publicity when it was published. Lots of clueless journalists and excitable remainers wet themselves with excitement over it and started citing it as "proof" that Brexit was rubbish.

The 4% turned out to not be an instantaneous 4% off GDP, but it was a forecast of 4% in the "long term". And it made no allowance for improvements due to Britain being able to diverge from EU laws (something which hasn't been put into practice after the establishment put the brakes on and the Conservatives gave up on divergence).

As we know economic forecasts are often as accurate as a Star Wars Stormtrooper on LSD shooting at a giant barn.

4% over say 15 years is about 0.27% per year, which isn't a disaster.

That TLF has lots of cheerleaders for a wealth tax is laughable. That's the sort of nonsense you'd expect to see on The Guardian, not a site that is supposed to be about making money.

[clissold345]

But we already reduce poverty through higher taxes. So the real issue is whether we should try and further reduce poverty through even higher taxes? And if so how do we know when to stop that endless process?

I am not a fan of the idea that nobody should be rich if anyone is still poor.

Poverty has increased (by a small amount) under the Conservatives (2010 to 2024). Here's a quote from the report I linked to: "The overall level of poverty has barely moved since Conservative-led Governments took power in 2010. Poverty last fell consistently during the first half of the last Labour administration (between 1999/2000 and 2004/05), but then rose in the second half of their time in power. In part, this reflects the hits to living standards that have affected everyone, from the economic slowdown even before the global financial crisis to the current cost of living crisis."

[Lootman]

But we already reduce poverty through higher taxes. So the real issue is whether we should try and further reduce poverty through even higher taxes? And if so how do we know when to stop that endless process?

I am not a fan of the idea that nobody should be rich if anyone is still poor.

Poverty has increased (by a small amount) under the Conservatives (2010 to 2024). Here's a quote from the report I linked to: "The overall level of poverty has barely moved since Conservative-led Governments took power in 2010. Poverty last fell consistently during the first half of the last Labour administration (between 1999/2000 and 2004/05), but then rose in the second half of their time in power. In part, this reflects the hits to living standards that have affected everyone, from the economic slowdown even before the global financial crisis to the current cost of living crisis."

Poverty goes up and down with economic cycles. It does not follow that such natural fluctuations warrant changes in tax rates, let alone a completely new tax.

Even Starmer has stated that the solution has to be economic growth and not old-fashioned handouts. The emphasis should be on creating wealth and not on confiscating or redistributing it.

[csearle]

A wealth tax is completely unfair - that is IMO the nub of the matter. Whatever you have, through prudence, squirreled away to make life more bearable later in life has already been taxed. For a government to then take it is much more like theft than tax. Even if someone hasn't enough assets to fall foul of it, the principle is still rotten. It could also be a slippery slope in that once it is established the thresholds could more easily be reduced.

The Lib Dems used to be big on this. Apparently they are rowing back a bit now to win over voters, but we have all learned what the word of that particular party is worth (I'm thinking now of the students of course). C.

[Lootman]

A wealth tax is completely unfair - that is IMO the nub of the matter. Whatever you have, through prudence, squirreled away to make life more bearable later in life has already been taxed. For a government to then take it is much more like theft than tax. Even if someone hasn't enough assets to fall foul of it, the principle is still rotten. It could also be a slippery slope in that once it is established the thresholds could more easily be reduced.

The Lib Dems used to be big on this. Apparently they are rowing back a bit now to win over voters, but we have all learned what the word of that particular party is worth (I'm thinking now of the students of course). C.

The fact that both Labour and the LibDems have walked back their advocation of a wealth tax to gain popularity is encouraging. One might think that since a majority of voters are not rich that they might vote to legally mug the minority who are rich, for purely selfish reasons.

That Labour and the LibDems think that the voters have more integrity than that is refreshing.

[Mike4]

Don't the Green Party have a policy to introduce a Wealth Tax that is reasonably well fleshed out?

I voted for them once, before I heard about this.

Ah yes, they do. Tax the richest 1% (probably a good proportion of the posters here) to raise £75bn to pay for insulating homes.

https://www.greenparty.org.uk/news/2022 ... ay-greens/

Who could possibly object to that?

Oh, hang on....

[Lootman]

Don't the Green Party have a policy to introduce a Wealth Tax that is reasonably well fleshed out?

I voted for them once, before I heard about this.

Ah yes, they do. Tax the richest 1% (probably a good proportion of the posters here) to raise £75bn to pay for insulating homes.

https://www.greenparty.org.uk/news/2022 ... ay-greens/

Who could possibly object to that?

Oh, hang on....

In 2019 the Green Party was the 9th most successful political party, winning just 1 seat. I fear that may overstate their popularity and relevance.