Driving the idea’s revival is the need for revenue. The pandemic has devastated government finances around the world, boosting spending by trillions of dollars, from India to Canada, while slashing tax collections.
The situation in the U.K. — which now faces its widest fiscal deficit since World War II — has brought the idea of taxing wealth back into the discussion. An independent commission last month called for a one-off levy to raise about 260 billion pounds ($354 billion) — more than a third of the U.K.’s tax receipts in the latest financial year. Raising that much money would require taxing individual wealth above 500,000 pounds at 1% annually for five years, affecting 8 million people.
“There’s been quite a lot of murmurings about reforming existing taxes on wealth, but everyone’s just effectively treated a wealth tax as being off the ‘serious’ agenda,” said
London School of Economics assistant law professor Andy Summers, one of the report’s authors. “Partly, that’s because barely anyone in the U.K. has studied it since the 1970s.”
Wealthy individuals represent a ripe target for taxation. So do wealthy companies with hundreds of billions sitting in cash. The time to look at trusts, real assets like gold or property, gifting to children, deferring income, options programs, internationally diversifying where wealth is held and potentially looking at alternative accommodations was yesterday.
Governments are broke, restive populations are resistant to tax hikes and fiscal austerity. Alternative revenue raising measures will need to be considered. In the UK taxes on second homes are an easy one. One off wealth taxes are another. What I find particularly interesting the low bar being set for proposed taxes. They seem willing to affect more people with a small level than a large number with a small one. That is likely to have electoral consequences.
In 1944, the USA taxed all income above $200,000 at 94% but that is $2.5 million in today’s Dollars. At present the incoming Biden administration is looking at raising taxes on everyone earning more than $400000, which is a rather low hurdle. This seems like the thin edge of the wedge and once installed the rate will only be increased.Back to top