Tax on wealth suggested

itwasntme001

Just because debt interest payments as a % of debt has fallen (whilst total debt levels increased as % of GDP), does not alone make that a good thing.  That debt needs to be productive for it to be beneficial.  Despite all the debt we have been accumulating, real GDP per capita has fallen and is falling more rapidly since the past 20 years.  It is a serious problem that needs to be addressed and "inflating your way out of it" has repercussions in terms of social unrest and further lowering of living standards.  That is why a wealth tax makes a lot of sense as you reduce wealth inequality, reduce the chances of higher inflation and reduce unfunded liability burden (if the government decides to "default" on these promises as part of a wealth tax - as it most certainly should).

Another_Saver

zagfles said:

Another_Saver said:

zagfles said:

The_Green_Hornet said:

Albermarle said:

There's been enough pain this year without further tax rises . Just stick it all on the national debt and forget it. Saving £100bn won't exactly pay it off. Slowly things will recover.

The problem with this is we do not know when the next disaster will strike . When it does better to have the debt at more manageable levels before we have to start borrowing more tens of billions. 

Debt interest, as a percentage of GDP, is the lowest it has been for decades so I would say it is currently at a very manageable level.


https://commonslibrary.parliament.uk/research-briefings/sn05745/

But I don't think that accounts for inflation does it? With high inflation as in the 70's and 80's the real value of the national debt reduces significantly year on year, with current levels of inflation it hardly reduces at all. So we might be paying less interest, but the debt isn't going down much in real terms.

It does. That's just the nominal total interest in that year's money/nominal GDP in that year's money.

Yes, I understand that. But it doesn't account for the real total national debt reducing with inflation.

It's like having a £100,000 interest only mortgage at 10% when inflation is 10%. You're paying 10% interest but your debt is reducing by 10% in real terms at the same time. 

If you then buy a bigger house doubling your mortgage to £200,000, but the mortgage rate and inflation have both dropped to 5%, then you're paying the same amount of interest as before (10% of £100k = 5% of £200k), but the real value of your mortgage is only reducing by 5% pa.

So in the first case, your real debt is reducing much faster.

I get that but inflation doesn't affect that chart. If you plotted it in real terms it would be the same, I think your point is that the chart's limitation is that it does not show inflation deflating the notional debt stock, which you've explained better than my War and Peace explaining stock returns/GDP in the Pension Recovery Performance 2020 thread 

Ocelot

The report suggested a wealth tax on 'couples' with £1m+ assets. They are suggesting 500,000 for single people, which is ridiculous.

TBC15

Just a thought.

There is a ton of money sitting in peoples pensions some of which will get handed over in the form of tax over the years.

Why not cough it up now to cover the deficit?

Probably needs a bit of fine tuning on the implementation side.

ColdIron

And presumably relieve us of future tax burdens and legislative changes?

Mickey666

TBC15 said:

Just a thought.

There is a ton of money sitting in peoples pensions some of which will get handed over in the form of tax over the years.

Why not cough it up now to cover the deficit?

Probably needs a bit of fine tuning on the implementation side.

Not necessarily.  Pension pots fall outside of IHT rules and when inherited become totally tax-free.

zagfles

Another_Saver said:

zagfles said:

Another_Saver said:

zagfles said:

The_Green_Hornet said:

Albermarle said:

There's been enough pain this year without further tax rises . Just stick it all on the national debt and forget it. Saving £100bn won't exactly pay it off. Slowly things will recover.

The problem with this is we do not know when the next disaster will strike . When it does better to have the debt at more manageable levels before we have to start borrowing more tens of billions. 

Debt interest, as a percentage of GDP, is the lowest it has been for decades so I would say it is currently at a very manageable level.


https://commonslibrary.parliament.uk/research-briefings/sn05745/

But I don't think that accounts for inflation does it? With high inflation as in the 70's and 80's the real value of the national debt reduces significantly year on year, with current levels of inflation it hardly reduces at all. So we might be paying less interest, but the debt isn't going down much in real terms.

It does. That's just the nominal total interest in that year's money/nominal GDP in that year's money.

Yes, I understand that. But it doesn't account for the real total national debt reducing with inflation.

It's like having a £100,000 interest only mortgage at 10% when inflation is 10%. You're paying 10% interest but your debt is reducing by 10% in real terms at the same time. 

If you then buy a bigger house doubling your mortgage to £200,000, but the mortgage rate and inflation have both dropped to 5%, then you're paying the same amount of interest as before (10% of £100k = 5% of £200k), but the real value of your mortgage is only reducing by 5% pa.

So in the first case, your real debt is reducing much faster.

I get that but inflation doesn't affect that chart. If you plotted it in real terms it would be the same, I think your point is that the chart's limitation is that it does not show inflation deflating the notional debt stock, which you've explained better than my War and Peace explaining stock returns/GDP in the Pension Recovery Performance 2020 thread 

Indeed - the chart shows nominal interest being paid on the debt, which isn't really useful. The useful measure would be real interest being paid, because that reflects the change in value of the underlying debt as well as the nominal interest being paid.

chucknorris

itwasntme001 said:

eskbanker said:

itwasntme001 said:

And for the wealth tax to work well enough without harming the economy, it needs to be a globally coordinated wealth tax so that it applies to all citizens in the developed world.  Since most developed countries are in a lot of debt, it should be pretty easy to implement.

Eh?  You seriously think that implementing a "globally coordinated wealth tax" would be easy - are you Liam Fox by any chance?!

Maybe I should have said easier.  It would be easier to implement as opposed to being the only country to impose it, since it will drive people out of the country.

Thrug mentioned about that the real wealthy people already live abroad in Monaco, but I fall into the 'not quite so wealthy band', I have already looked at the Isle of Man. To be honest, I would have probably gone, I really liked the place (although the weather isn't great), but the disruption and distance from friends/family and more importantly my wife's doubts, didn't make it worth it for about a £40k saving in tax PA (that is net after paying all the annual extras incurred). But if a wealth tax is going to increase that to £110k, all I can probably say is goodbye. 

zagfles

TBC15 said:

Just a thought.

There is a ton of money sitting in peoples pensions some of which will get handed over in the form of tax over the years.

Why not cough it up now to cover the deficit?

Probably needs a bit of fine tuning on the implementation side.

Because the govt don't really need it straight away with low borrowing costs, they can just wait and get more - as it's probably likely pensions will rise faster. As they tend to be invested in assets that produce better returns than gilts (ie govt borrowing costs)

zagfles

Mickey666 said:

TBC15 said:

Just a thought.

There is a ton of money sitting in peoples pensions some of which will get handed over in the form of tax over the years.

Why not cough it up now to cover the deficit?

Probably needs a bit of fine tuning on the implementation side.

Not necessarily.  Pension pots fall outside of IHT rules and when inherited become totally tax-free.

Only for those who die under 75. If they die over 75 pension pots are taxable. Most people die over 75.