London Daily

Focus on the big picture.
Saturday, May 31, 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Britain’s neighbour learned this the hard way: France’s Emmanuel Macron repealed the country’s own version of a wealth tax two years ago after the policy had led to brain-drain and tens of thousands of wealthy residents fleeing the country.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 Over time, the majority repealed them, as they failed to raise the desired revenue and caused more problems than they solved.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
Satirical Sketch Sparks Political Spouse Feud in South Korea
Indonesia Quarry Collapse Leaves Multiple Dead and Missing
South Korean Election Video Pulled Amid Misogyny Outcry
Asian Economies Shift Away from US Dollar Amid Trade Tensions
Netflix Investigates Allegations of On-Set Mistreatment in K-Drama Production
US Defence Chief Reaffirms Strong Ties with Singapore Amid Regional Tensions
Vietnam Faces Strategic Dilemma Over China's Mekong River Projects
Malaysia's First AI Preacher Sparks Debate on Islamic Principles
White House Press Secretary Criticizes Harvard Funding, Advocates for Vocational Training
France to Implement Nationwide Smoking Ban in Outdoor Spaces Frequented by Children
Meta and Anduril Collaborate on AI-Driven Military Augmented Reality Systems
Russia's Fossil Fuel Revenues Approach €900 Billion Since Ukraine Invasion
U.S. Justice Department Reduces American Bar Association's Role in Judicial Nominations
U.S. Department of Energy Unveils 'Doudna' Supercomputer to Advance AI Research
U.S. SEC Dismisses Lawsuit Against Binance Amid Regulatory Shift
Alcohol Industry Faces Increased Scrutiny Amid Health Concerns
Italy Faces Population Decline Amid Youth Emigration
U.S. Goods Imports Plunge Nearly 20% Amid Tariff Disruptions
OpenAI Faces Competition from Cheaper AI Rivals
Foreign Tax Provision in U.S. Budget Bill Alarms Investors
Trump Accuses China of Violating Trade Agreement
Gerry Adams Wins Libel Case Against BBC
Russia Accuses Serbia of Supplying Arms to Ukraine
EU Central Bank Pushes to Replace US Dollar with Euro as World’s Main Currency
Chinese Woman Dies After Being Forced to Visit Bank Despite Critical Illness
President Trump Grants Full Pardons to Reality TV Stars Todd and Julie Chrisley
Texas Enacts App Store Accountability Act Mandating Age Verification
U.S. Health Secretary Ends Select COVID-19 Vaccine Recommendations
Vatican Calls for Sustainable Tourism in 2025 Message
Trump Warns Putin Is 'Playing with Fire' Amid Escalating Ukraine Conflict
India and Pakistan Engage Trump-Linked Lobbyists to Influence U.S. Policy
U.S. Halts New Student Visa Interviews Amid Enhanced Security Measures
Trump Administration Cancels $100 Million in Federal Contracts with Harvard
SpaceX Starship Test Flight Ends in Failure, Mars Mission Timeline Uncertain
King Charles Affirms Canadian Sovereignty Amid U.S. Statehood Pressure
Trump Threatens 25% Tariff on iPhones Amid Dispute with Apple CEO
Putin's Helicopter Reportedly Targeted by Ukrainian Drones
Liverpool Car Ramming Incident Leaves Multiple Injured
Australia Faces Immigration Debate Following Labor Party Victory
Iranian Revolutionary Guard Founder Warns Against Trusting Regime in Nuclear Talks
Macron Dismisses Viral Video of Wife's Gesture as Playful Banter
Cleveland Clinic Study Questions Effectiveness of Recent Flu Vaccine
Netanyahu Accuses Starmer of Siding with Hamas
Junior Doctors Threaten Strike Over 4% Pay Offer
Labour MPs Urge Chancellor to Tax Wealthy Over Cutting Welfare
Publication of UK Child Poverty Strategy Delayed Until Autumn
France Detains UK Fishing Vessel Amid Post-Brexit Tensions
Calls Grow to Resume Syrian Asylum Claims in UK
Nigel Farage Pledges to Reinstate Winter Fuel Payments
Boris and Carrie Johnson Welcome Daughter Poppy
×