Back in January, I wrote a blog called Will the wealth tax never die? It rather looks like the answer is no. We aren't against land taxes, property taxes or location taxes in general at Moneyweek. Far from it.
If we were building an economy from scratch we'd probably base our new tax system on location values. But we aren't starting from scratch: any new wealth taxes or property taxes will come on top of the taxes we have already.
I'm having a week of lists (see my last blog for a list of reasons why the Lib Dem property to pension scheme can't possible do any good), so here is a list of the reasons why a wealth tax or a new tax on the value of property is a bad idea.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
We already have wealth taxes. We have stamp duty and we have inheritance tax(IHT). The latter could be considered more of an income tax on the heir rather than a wealth tax on the deceased but the former is most definitely a wealth tax. So if we get a wealth tax, do we dump stamp duty (so infuriating any recent purchasers), or do we add to the misery of our tax system by keeping both?
It would bedifficult and expensive to collect. If a wealth tax simply means an extension of the existing council tax bands (new big ones for million plus-pound houses), it isn't the end of the world. But if it means all wealth, it is another matter altogether. Which is why most countries end up abandoning wealth taxes that move beyond property.
It adds yet another layer of double or even triple taxation to an already unfair and complicated system. Nick Clegg keeps referring to unearned wealth by which I assume he means inheritance and capital gains adjusted for inflation. But the taxes he is so keen on will hit earned wealth too. After all, what is wealth for most of us but income earned in previous tax years and saved?
With fiscal drag, it will be no time at all before it is not a wealth tax, but an everyman tax - just like the 40% rate.
Redistribution has to have its limits. In an article in the FT today, Janan Ganesh claimed that a wealth tax on property would be "a correction of the vast and unequal accumulations of wealth left behind by a rigged housing market". But once you start down that road where do you end?
Is everyone to be compensated for money made anywhere else in any non-pure market (ie, all markets) by another economic actor? As a cross reader emailed today "The Eskimos weren't involved in the London property market either and so didn't benefit. Are we supposed to compensate them too?"
IF we want the state to have a share of the gains made in the property market, we are surely better doing what we constantly suggest at Moneyweek and charging an indexed capital gains tax on the sale of primary homes. I've written about this before. You can read it here: Two steps towards solving the housing 'crisis'.
-
Christmas at Chatsworth: review of The Cavendish Hotel at BaslowMoneyWeek Travel Matthew Partridge gets into the festive spirit at The Cavendish Hotel at Baslow and the Christmas market at Chatsworth
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
-
Beating inflation takes more luck than skill – but are we about to get lucky?Opinion The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank of England may be about to get lucky.
-
Rishi Sunak can’t fix all our problems – so why try?Opinion Rishi Sunak’s Spring Statement is an attempt to plaster over problems the chancellor can’t fix. So should he even bother trying, asks Merryn Somerset Webb?
-
Young people are becoming a scarce resource – we should value them more highlyOpinion In the last two years adults have been bizarrely unkind to children and young people. That doesn’t bode well for the future, says Merryn Somerset Webb.
-
Ask for a pay rise – everyone else isOpinion As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why you should do that too.
-
Why central banks should stick to controlling inflationOpinion The world’s central bankers are stepping out of their traditional roles and becoming much more political. That’s a mistake, says Merryn Somerset Webb.
-
How St Ives became St Tropez as the recovery drives prices sky highOpinion Merryn Somerset Webb finds herself at the epicentre of Britain’s V-shaped recovery as pent-up demand flows straight into Cornwall’s restaurants and beaches.
-
The real problem of Universal Basic Income (UBI)Merryn's Blog April employment numbers showed 75 per cent fewer people in the US returned to employment compared to expectations. Merryn Somerset-Webb explains how excessive government support is causing a shortage of labour.
-
Why an ageing population is not necessarily the disaster many people think it isOpinion We’ve got used to the idea that an ageing population is a bad thing. But that’s not necessarily true, says Merryn Somerset Webb.
