Tax on wealth suggested

Mickey666

TC56_803_9 said:

All through my lifetime my experience is that the fraction has risen of those  people who believe in the delusion that making governments responsible for redistribution of monies within the population is a near zero cost affair.  Few understand how inefficient Govts are at collecting taxes and getting it to the target receipients.  Keeping it simple is the best way of reducing costs at the collection end.  This Wealth Tax smacks of inefficiency with so many factors to put in the mix it will allow the unscrupulous and wealthy to wriggle away and will hurt the moderately wealthy honest citizen the most. 

I looked in the report Wealth Tax Commission wealth tax for the UK - which is the advising document,  to see what they said.  At the opening paragraph I was well impressed with Healey and that they quoted him.

"4.3.4 Administrative costs  The administrative costs of collecting a wealth tax are an important issue. In 1989, the former Chancellor of the Exchequer, Denis Healey, reflected on the position in 1974: ‘We had committed ourselves to a Wealth Tax; but in five years I found it impossible to draft one which would yield enough revenue to be worth the administrative cost and the political hassle’. The Irish wealth tax, introduced around the same time and abolished in 1979, was criticised for having excessive administrative costs for taxpayers and the tax authority, with operating costs equal to one-quarter of the revenue (Sandford and Morrissey, 1985). Are these concerns still justified? Costs to tax authority Advani, Hughson and Tarrant (2020)"

So there I was thinking there would be some sense to follow that but oh no we quickly go off into fairy-land. This is just a false flag to put the wary off their guard.  Costs are detailed - here is a taster...Fixed set up costs to get the whole lot rolling out.

"These are estimated to be £579 million. This comes from two elements. First, a £245 million cost of revaluing the entire housing stock, which is based on the costs from the 2001–05 aborted revaluation of council tax (uprated for wage inflation). Second, a£334 million cost of building a new administrative system, based on the costs of designing and developing the new Customs Declaration Service" 

So we can get it up and running for under £1bn in fact lets not be imprecise - £579m + £334m = .£0.910bn  Errrrr how is that track and trace system doing ?  In November they had to throw another £7bn at it to take it up to £22bn. This week there were statements that those employed on pay rates carers, who have worked throuhghout lockdown  could only dream of were being active for only 1% of their time !  Way to go !  In the land of fairies these experts predict the costs would come in at around 1.4% of revenue generated. 

 

We live in crazy times.  These are snake oil salesmen. But they have seen other snake oil salesmen get away with it so why not ?

 

I don't know how many of you read the original paper that changed the strategy of the UK & USA Govts in March - the Imperial paper published by Ferguson and his mates - you know the guy whose fancy bit broke lockdown to visit him for cup of tea and a biscuit or some such.  Well at least she was not wanting to test her eyes.  It was the paper that said we would have 450,000 dead within weeks if we did not lock down and 250,000 dead even if we did a full lockdown.  ie of the order of the total dead from the near 6 years of WW2, all within about 12 weeks. 

I wanted to see their base assumptions and there it was in black and white - they assumed the lethality of Covid was identical to Spanish flu at around 3%.  Even by when I looked at it, at the start of lockdown, it was obvious that the lethality profile of Covid 19 was nothing like that of Spanish flu.  The demograph of data from Italy was completely different and diet had a huge impact on Spanish flu.  Now,  no-one can row back.  The costs have been enormous by so many measures that they must be justified.  No one will get a counter narrative out there.  Nobody is going to say “oopps we scared the !!!!!! out of you, if you are under 50 with no underlying health conditions the threat is minimal, we just have to go banzai to protect the elderly,  The rest of you keep working.” 

This tax will be popular because there are way more people below the threshold than above and once it has momentum there will be no stopping it. 

For myself I have little interest in it.  Depending on how it is measured, as somebody wrote upthread his assets had moved around £80,000 since March 2020,  I might just be in or just be over so I might pay a little.  But why go for something so complicated and that the unscrupulous will escape from. I find their figure of 10% losses for lack of compliance fanciful.

 

Be honest and use tools for which the infrastructure is in place.  Raise income tax and VAT. Earning up to £12.500 with no tax is a good starting point. Our carers get to keep more of their salary unlike the track and trace operatives.   Reduce higher thresholds and increase rates.  Increase VAT on a range of things you want to surpress consumption of.  Purchase tax on cars used to be up at 50% and came down to 25% in 1963.  We have a crisis - whack it up to 50%.  And don't allow business users to offset it.  Nobody on benefits is buying a new car nor any carers who are major breadwinners and with registration Govt controlled compliance will be way better than 90%. or perhaps a more realistic 75%. 

I would much prefer to pay purchase tax – then the choice is mine.  If I don’t want to be taxed I should not buy the stuff.  I would even prefer income tax.  But this welath tax is so "after the event" and encourages even more fecklessness.  Why bother saving for your old age, make sure you have blown everything by state pension age ?

Well said.
Our tax system is ridiculously complicated, but that seems to be the way governments (of any persuasion) like it.  It give the chancellor lots to say come budget day because he can fiddle a bit here and there.  Some years ago ‘flat taxes’ seemed to figure quite a lot in these sorts of discussions as a way to simplify the tax system.  It’s also widely accepted that most people have an innate feeling for what is fair and if taxes are pushed up beyond this then they make more effort to avoid it.  Of course, different people have different views of what’s ‘fair’, but it’s a general principle that seems to drive behaviour.  There were reported examples of former Eastern European countries INCREASING their tax revenues by reducing tax rates and simplifying their tax regimes.  Reduced tax rates meant less pursuit of avoidance schemes and simplification increased collection efficiency.
The tax system is also closely intertwined with the benefits system, adding even more complexity.  Why, for example, is the personal allowance BELOW the national minimum wage, or indeed the living wage?  That’s basically saying someone needs a minimum wage to live, but we’re going to take some of it away in tax, but don’t worry because you can claim various benefits to ensure you get a ‘living’ income.  It’s madness.  

Grumpy_chap

The article linked in the OP of this thread seems to suggest the "wealth tax" as a one-off tax on millionaire couples. 

As a one-off tax, that seems mightily unfair as a couple with just over £1m today are taxed, but their neighbours who just bought a car so have fractionally under a £1m today are not taxed.  It would really just amount to an indiscriminate retro-active charge.

If the "one-off" idea was swapped to a permanent basis of "wealth tax" as a feature of the taxation system, then that could drive undesireable outcomes and potentially cost the state more in the long term.  The level of wealth a couple have is down to a large number of circumstances, decision made some years ago and also, to a very large part, a function of life-stages:

• For most 20-something couples setting out on life's great big adventures, having "wealth" of £1m is very likely an impossible dream.
• For the same couple's parents, however, possibly in the final decade of planned working careers having "wealth" of £1m is probably not unusual or exception as "wealth" is held in the mortgage-paid house plus pension funds.
• The original couple's grandparents will likely have reduced "wealth" having drawn down the pension fund and down-sized the house to enjoy some fantastic holidays or such like over the past decade.

So, what do you exclude from "wealth"?  Principal Private Residence?  Pension?  BTL in-lieu of pension?  

What will be the incentive for the 20-something couple to build a pension fund that will be taken away from them (as "wealth") rather than live the high-life now and rely on a future state pension?

Aceace

Grumpy_chap said:

The article linked in the OP of this thread seems to suggest the "wealth tax" as a one-off tax on millionaire couples. 

As a one-off tax, that seems mightily unfair as a couple with just over £1m today are taxed, but their neighbours who just bought a car so have fractionally under a £1m today are not taxed.  It would really just amount to an indiscriminate retro-active charge.
...

No, because it only proposes to tax the portion above £1m. So the first couple would pay 1% on their wealth above £1m and the second couple would pay no tax. 

thegentleway

Grumpy_chap said:

• For most 20-something couples setting out on life's great big adventures, having "wealth" of £1m is very likely an impossible dream.

You’re grossly underestimating the power of compound interest. A couple of 20 year olds only need to invest £50 a month each to have a million by retirement age! 

TC56_803_9

thegentleway said:

Grumpy_chap said:

• For most 20-something couples setting out on life's great big adventures, having "wealth" of £1m is very likely an impossible dream.

You’re grossly underestimating the power of compound interest. A couple of 20 year olds only need to invest £50 a month each to have a million by retirement age! 

24 year olds investing and never removing a penny for 43 years putting in £100 per month between them need an annulised return of 11.25% to achieve £1m.  That will require elements of risk well beyond anything guaranteed by the FSC.  And with that risk there are winners and there are losers.  

thegentleway

TC56_803_9 said:

thegentleway said:

Grumpy_chap said:

• For most 20-something couples setting out on life's great big adventures, having "wealth" of £1m is very likely an impossible dream.

You’re grossly underestimating the power of compound interest. A couple of 20 year olds only need to invest £50 a month each to have a million by retirement age! 

24 year olds investing and never removing a penny for 43 years putting in £100 per month between them need an annulised return of 11.25% to achieve £1m.  That will require elements of risk well beyond anything guaranteed by the FSC.  And with that risk there are winners and there are losers.  

That’s because you’ve stolen 3 years of compounding! I said a 20 year old and retirement age (currently 66)
£100 a month for 46 years at 10% (historical yearly return) gets you a million. If you want to do it in 43 years you’ll need £134 a month. Whichever way you look at it’s hardly an impossible dream.

Another_Saver

£1200pa nominal with no inflation uplift at 9.6% for 48 years (20-68) gets you a million.

Let's be more realistic, take inflation out of it, £1200pa at 4% gets you £100k from 20-58 (let's face it who wants to wait for the SP).

Apodemus

No-one has raised the "couple" question!  How do we define that?  How do we define what assets are shared?  It seems to me it would be fairly easy for a wealthy couple to arrange their affairs (no pun intended!) so that assets remain individual and remove an additional million of assets from being taxed.  

Malkytheheed

Well we are in the process right now of moving our business from the UK to Delaware. Sad but true. 

Obviously people are happy to pay a fair amount of tax (even the wealthy) but when it gets to punitive levels then they will just move their money elsewhere. I have no particular affinity to my own country, I've never felt a great deal of patriotism or nationalism, the way I see it we are all on this tiny rock flying through space.l trying to survive. In the UK the changes to entrepreneurial tax relief and now this suggestion that capital gains should double!! Just makes me feel that the UK isn't a good place to start or run a business or indeed a good "bank" to keep my money in.

The vast majority (95%) of our clients come from the US so it's fairly easy for us to make the move. It's sad because we were the ideal business for the UK. Bringing in new money from outside the country. But now that money will stay in the US. I don't really want to do it. But push people enough and they will leave. Why would I pay massively more tax than I need to or feel is a fair amount?

 It just seems that increasingly wealth creation is penalised in the UK. Id rather move my money to a country that encourages not penalises growth. 

Malkytheheed

If you tax the wealthy to a unpalatable level they will leave. Then what are you left with? A country full of socialists with no money to go around.