TAX The RICH - UK

➡️ TAX THE RICH – The UK Wealth Tax Debate

Did you know that the majority of UK millionaires and billionaires actually pay lower rates of tax than ordinary working people such as teachers and nurses?

This is because income is taxed at a higher rate than wealth meaning that those who gained their wealth through investments or rising property values (the majority of millionaires), pay a lower percentage of tax.

Currently, the lowest 10% of earners have an effective tax rate of 44%, more than twice as high as those in the top 0.01%.

• In 2021/22 more than 1 in 5 people in the UK were living in poverty – 14.4 million people

• The wealth of the richest 1% of households is greater than the entire bottom 80% of the population

• The covid-19 pandemic saw the number of billionaires in the UK increased by 20%

Public support for a UK wealth tax is overwhelming with 78% advocating for an annual wealth tax for those with assets worth over £10 million. Organisations such as Greenpeace, Tax Justice, and the Just Money Movement are campaigning for the implementation of a fair and progressive tax system which ensures that people from all backgrounds contribute their share to society.

Pros of a Wealth Tax in the UK

Even just a 2% tax increase on those with assets over £10 million could raise £22 billion per year. This is enough to cover the average salary cost of more than 600,000 nurses a year.

By taxing the wealthy, the government would be able to generate revenue to fund essential public services such as healthcare, education, and social security. These services especially benefit lower income households at very little cost to those on much higher incomes.

Economic inequality in the UK is at an all-time high and has been increasing year on year since the 1980s. This tale of two-Britons has been highlighted by the unprecedented NHS nurse and junior doctor strikes, the rail strikes, massive increases in union membership, and huge class wage disparity.

Cons of a Wealth Tax in the UK

Opponents of tax hikes on the wealthy often cite potential economic risks such as reduced investment, lower economic growth, and capital flight. Higher taxes can disincentivise business investments and entrepreneurship, as individuals and corporations might see reduced returns on their investments. There is also the risk of high earners relocating to countries with more favourable tax systems.

One of the biggest issues with a wealth tax is valuation. Many of the super-rich hide their wealth in companies and trusts under disguised ownership. It is incredibly difficult to determine the market value of many kinds of assets such as art, cars, race horses, shares etc. In order to accurately assess the value many more tax inspectors would need to be employed.

A Wealth Tax for a Better World?

The idea of a wealth tax is not just utopian idealism. This system is already in place in Colombia, France, Norway, Spain, and Switzerland. Tax is a tool that can be used to create a more equal society and to help fund services that benefit the wider community.

Wealth tax is a hot topic as in April, the finance ministers from Brazil and France announced their plans to implement a 2% tax on billionaires. Brazil, the 2024 host of the G20 summit, commissioned an investigation into the viability of a global wealth tax. It revealed that a tax on those with assets over $100 million could be enforced even without the backing from every country.

More than two-thirds of people across the G20 countries are in favour of the measure as a means to fund and address global issues such as poverty and the climate crisis.

Proposals for a Robin Hood tax on the millions of financial transactions is another popular idea. Banks are turning over vast profits and bosses are rewarding themselves with gigantic bonuses, a financial transaction tax would impose a tiny tax on the purchase of assists such as shares, bonds, and derivatives. It has been estimated that this would raise a further £5 billion a year.

Another way to impose higher taxes on the wealthy includes abolishing VAT and replacing it with a luxury goods tax. This would create a massive working-class tax cut and increase the cost of luxury consumption for the rich.

An estimated £570 billion is thought to be held in offshore tax havens by UK residents, and £35 billion in tax revenue is lost every year due to tax evasion through fraud and underreporting of income.

The UK, spurred by 14 years of Conservative rule, austerity, and political instability is currently struggling with multiple crises including cost-of-living, a housing shortage, the dismantling of the NHS, and high inflation. A fairer tax system could play an important role solving these issues.

The combined wealth of Britain’s billionaires in 2022 was £653 billion. There is plenty of money, it just needs to be fairly taxed, and then invested back into the public.

Author: Rachael Mellor 28.07.24, licensed under CC BY-ND 4.0.

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