London Daily

Focus on the big picture.
Friday, Jun 20, 2025

Wealth taxes are not the answer to our financial woes

Wealth taxes are not the answer to our financial woes

Today the Wealth Tax Commission, an initiative involving the LSE, has recommended a ‘one-off’ 5 per cent levy on the assets of Britain’s wealthy residents to pay for the costs of the pandemic. Two immediate problems jump out of the proposal.
First, to raise the money it would not be a one-off levy, but rather a 1 per cent tax for five years on the total wealth — property, savings, you name it — on households worth more than £1 million (the tax is estimated to hit one in six adults).

Second, this five year period is estimated to raise £260 billion — close to the £280 billion the Office for Budget Responsibility says can be ‘directly attributable to the package of support’ announced since March to tackle Covid-19. But total borrowing this year is estimated to be £394 billion. This would still leave quite a significant hole in the public finances, making the wealth tax a far less convincing 'saviour policy'.

It’s no real surprise that this proposal isn’t what it says on the packaging. As I say in today’s Daily Telegraph, wealth taxes don’t work and are perhaps one of the worst possible ways of raising revenue.

Britain’s neighbour learned this the hard way: France’s Emmanuel Macron repealed the country’s own version of a wealth tax two years ago after the policy had led to brain-drain and tens of thousands of wealthy residents fleeing the country.

From Sweden to Austria, European countries have done their fair share of flirtation with some form of wealth tax. Over time, the majority repealed them, as they failed to raise the desired revenue and caused more problems than they solved.

The most obvious problem with the tax is how it destroys wealth over time, eroding a country’s tax base that is crucial for producing revenue in the future. Those who are asset-rich but cash-poor are forced to sell what they own, which the government then takes and uses on a spending spree. This week Argentina has announced a one-off levy on those with assets worth more than £1.8 million, also in the name of paying for Covid.

The money will be used, among other things, to pay for PPE and provide relief for struggling industries. The intentions may be good, but in practice this transfer of wealth will also reduce wealth itself, leading to longer-term implications and an inevitably poorer society.

Today’s report from the commission claims a one-off (five year) tax won't distort behaviour, ‘since it is based on wealth at a (past) point in time.’ It would certainly make it hard for people to avoid it, as it is targeting wealth that already exists.

But this speaks to the moral problems with the tax: a wealth-grab like this breaks the social contract between taxpayers and government. People pay their taxes on the understanding that their money, property and assets belong to them, not the government.

To blindside taxpayers with a new principle — that the state can come and collect your wealth anytime it sees fit — would certainly distort future behaviour, as confidence and trust in the system are undermined overnight.

The report itself acknowledges this: that wealth taxes rely ‘on people not being able to respond before the tax is introduced’ — or put another way, it requires the state to undermine personal autonomy over one’s finances.

Wealth taxes are a form of double-taxation that penalise taxpayers and, in the long run, governments, which find themselves with fewer wealthy residents and an eroded tax base. No amount of theorising (or commissions) can turn wealth taxes into a good idea. What the UK needs right now are creative ideas for its Covid bounce back — not ones that put up even more barriers on our road to recovery.
Newsletter

Related Articles

0:00
0:00
Close
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
Iranian Military Officers Reportedly Seek Contact with Reza Pahlavi, Signal Intent to Defect
FBI and Senate Investigate Allegations of Chinese Plot to Influence the 2020 Election in Biden’s Favor Using Fake U.S. Driver’s Licenses
Vietnam Emerges as Luxury Yacht Destination for Ultra‑Rich
Plans to Sell Dutch Embassy in Bangkok Face Local Opposition
China's Iranian Oil Imports Face Disruption Amid Escalating Middle East Tensions
Trump's $5 Million 'Trump Card' Visa Program Draws Nearly 70,000 Applicants
DGCA Finds No Major Safety Concerns in Air India's Boeing 787 Fleet
Airlines Reroute Flights Amid Expanding Middle East Conflict Zones
Elon Musk's xAI Seeks $9.3 Billion in Funding Amid AI Expansion
Trump Demands Iran's Unconditional Surrender Amid Escalating Conflict
Israeli Airstrike Targets Iranian State TV in Central Tehran
President Trump is leaving the G7 summit early and has ordered the National Security Council to the Situation Room
Taiwan Imposes Export Ban on Chips to Huawei and SMIC
Israel has just announced plans to strike Tehran again, and in response, Trump has urged people to evacuate
Netanyahu Signals Potential Regime Change in Iran
Juncker Criticizes EU Inaction on Trump Tariffs
EU Proposes Ban on New Russian Gas Contracts
Analysts Warn Iran May Resort to Unconventional Warfare
Iranian Regime Faces Existential Threat Amid Conflict
Energy Infrastructure Becomes War Zone in Middle East
UK Home Secretary Apologizes Over Child Grooming Failures
Trump Organization Launches 5G Mobile Network and Golden Handset
Towcester Hosts 2025 English Greyhound Derby Amid Industry Scrutiny
Gary Oldman and David Beckham Knighted in King's Birthday Honours
Over 30,000 Lightning Strikes Recorded Across UK During Overnight Storms
Princess of Wales Returns to Public Duties at Trooping the Colour
Red Arrows Use Sustainable Fuel in Historic Trooping the Colour Flypast
Former Welsh First Minister Addresses Unionist Concerns Over Irish Language
Iran Signals Openness to Nuclear Negotiations Amid Ongoing Regional Tensions
France Bars Israeli Arms Companies from Paris Defense Expo
King Charles Leads Tribute to Air India Crash Victims at Trooping the Colour
Jack Pitchford Embarks on 200-Mile Walk to Support Stem Cell Charity
Surrey Hikers Take on Challenge of Climbing 11 Peaks in a Single Day
UK Deploys RAF Jets to Middle East Amid Israel-Iran Tensions
Two Skydivers Die in 'Tragic Accident' at Devon Airfield
Sainsbury's and Morrisons Accused of Displaying Prohibited Tobacco Ads
UK Launches National Inquiry into Grooming Gangs
Families Seek Closure After Air India Crash
Gold Emerges as Global Safe Haven Amid Uncertainty
Trump Reports $57 Million Earnings from Crypto Venture
Trump's Military Parade Sparks Concerns Over Authoritarianism
Nationwide 'No Kings' Protests Challenge Trump's Leadership
UK Deploys Jets to Middle East Amid Rising Tensions
Trump's Anti-War Stance Tested Amid Israel-Iran Conflict
Germany Holds First Veterans Celebration Since WWII
U.S. Health Secretary Dismisses CDC Vaccine Advisory Committee
Minnesota Lawmaker Melissa Hortman and Husband Killed in Targeted Attack; Senator John Hoffman and Wife Injured
Exiled Iranian Prince Reza Pahlavi Urges Overthrow of Khamenei Regime
×