As we know that committee report on the idea of a one of wealth tax to pay for Covid. Yes, I think it’s a terrible idea and so do people who know about taxation. Still, that idea’s out there and so there will be people who argue for it.
It’s The Guardian that brings us the lovely news about it. Quite wonderful stuff in fact:
Any politician who looks at this dire situation and starts by wondering how one of the richest societies in human history, with its own sovereign currency, will be able to pay for it is asking the wrong question. We need first to minimise the damage and then worry about the bill, a process that may well take us into the second half of this decade. But at some point Westminster will start debating how to reduce the national debt, and against that backdrop the report from the Wealth Tax Commission makes stimulating reading.
Entirely correct, right now is really the wrong time to be raising taxes upon anything. This is true whether you use a Keynesian, MMT or even – spit – neoliberal analysis of the economy. Recessions just aren’t the time to be increasing taxation.
This means we have some time to discuss that future tax rise of course. My own response would be let’s kill the quangos and pay for everything from their rotting corpses. A minority view to be sure but one that would both work and also gain at least some support.
But we do need to examine this wealth tax idea as well. At which point The Guardian gives us the really good news. We don’t have to argue in the abstract. By the time any decision needs to be made we’ll have empirical evidence:
A funny thing happened in Buenos Aires last Friday: parliamentarians there voted by a chunky majority to slap super-rich Argentines with a tax to pay for the economic damage done by Covid. Anyone sitting on wealth of over 200m Argentinian pesos (£1.8m) will have to pay a one-off levy that the government hopes will raise billions to buy medical equipment, support small business, and help poor neighbourhoods. The so-called “millionaire’s tax” was a remarkable move that has been noted around the world, along with the justification provided by one senator: “We must find points of connection between those who have the most to contribute and those who need it.”
OK, the details are:
Argentina has passed a new tax on its wealthiest people to pay for medical supplies and relief measures amid the ongoing coronavirus pandemic.
Senators passed the one-off levy – dubbed the “millionaire’s tax” – by 42 votes to 26 on Friday.
Those with assets worth more than 200 million pesos ($2.5m; £1.8m) – some 12,000 people – will have to pay.
Right.
Those affected will pay a progressive rate of up to 3.5% on wealth in Argentina and up to 5.25% on that outside the country.
That’s a fairly chunky wealth tax. It’s also a little smaller than the UK suggestion:
Authored by a team of tax experts, it demonstrates that a one-off 1% wealth tax levied on millionaire households would raise up to £260bn
Err, no, it’s 1% a year for 5 years.
So, someone else is doing this. Doing it some years before we even have to make a decision. We should thus study the success, or not, of this before we make our decision, no?
My best guess is that it’ll be a complete Mongolian Clusterfuck. Little revenue raised, economic growth badly hit, investment falling through the floor. But then what do I know, only a little economics after all.
But it is good news, isn’t it? Someone else is making the mistake and we can observe before we do.
Sounds like Joe Biden: “spend first, ask questions later.” Who, me, budget? I have a gun! (Note, Trump in 2020 followed the same principle.)
Of course Argentina’s tax will immediately shift productive resources into tax avoidance/evasion and predicted revenue will not occur. And who near that $2.5 million will start new enterprises to advance further, with the legislature drawing a bull’s-eye on your back? Why do Argentina’s productive have to pay for the fact that its gov’t fell for the worldwide stampede that a pesky chest cold was the Plague?
Note also, Cuomo in New York State vows new taxes on high-earners, possibly mitigated if Congress sticks a bail-out into the next Covid “relief” bill. The state (and New Jersey) have already induced the finance industry to move clearing operations, and possibly the trading floor, to Texas.
I expect one of the first things to go in a Biden administration would be the limit on deductions for state income tax. This will set the stage for higher taxes in the Blue states.
Planning to follow Elon Musk to Texas shortly.
Why, yes! when Pelosi was holding out for $3,000 million in Covid “relief,” that change to the tax code was part of it.
Best of luck on your move!
Sorry, it was $3,000,000 million ($3 trillion).
Read my lips. It ain’t ever going to happen. The WTC wealth tax proposes to tax both housing and pensions. So, this will require two things to happen: (1) Firstly, someone will have to go round the country valuing every single property. Suppose you bought your house for £100,000 a long time ago and now some clipboarded cnut is telling you it’s worth £1.3 million, so pay your wealth tax. Government doesn’t have the stomach for all the stories of little old ladies being forced out of the house they shared with their beloved husband for 50 years just because… Read more »
Yes, a forgotten aspect of proposing to tax something new is that someone has to inventory the entire stock subject to tax! The US has a property tax, mostly to fund gov’t schools; here it does entail a personal visit every 5 years seeking to view the inside of your home.
But gov’t revels in stories of ruined little old ladies. And will never have to get honest about public pensions, and might exclude them from the calculation entirely “to attract the best talent [sic].”
Point 1 is valid, but overstated. The reason revaluation of all houses for council tax is politically toxic is because EVERYONE gets dragged in. Rich and poor, it matters not where you are on the ladder if your house has gone up in value you’ll be paying more, even if you’re the tenant, as they pay the council tax. Whereas taxing just the people who own big houses will play just fine with those in small and not so big houses. And indeed anyone who rents a big house. Point 2 is one that just won’t be allowed to happen.… Read more »
Look no further than Theresa May’s ‘dementia tax’. Electoral catastrophe. Imagine how many NHS consultants will hang around if threatened with having their pensions and properties raided. It will never happen.
Anyone who knows anything about Argentinian economics over the last few decades would look at what they’re doing and do the exact opposite.
What’s the guessing that lots of politicians in Argentina are worth about $2.4m?
Argentina is a funny place. It’s not like any other place in South America. Just walking the streets it looks and feels like you could be in Europe, or at least southern Europe. Lots of pretty women who appear to have sprayed their jeans on. Outside coffee shops. The subway makes you think of London. There’s some beautiful scenery with wonderful trout streams. I once galloped a horse at dusk and suddenly found myself in a cloud of fireflies. However, it is one of the most messed up places in the world and whatever they touch turns to crap. I’m… Read more »
I loved Argentina when I went there in the late 70’s and early 80’s. It had big issues then, which seem to have got a lot worse.
Some of those avenues in BA were beautiful.
It’s a fantastic place and I’ve always loved visiting. It’s curse and it’s blessing is that it’s full of the descendants of Italian immigrants.
Or to watch it. https://www.parliamentlive.tv/Event/Index/16a7c02d-4118-4a88-9674-c35a57eb18b1
Ok, I’ve got wealth of a £150,000 house. I now have to pay £5,000. How do I do that? Slice off the kitchen and sell the bricks? And next year I strip off the roof and sell that? And the next year? Alternatively, I’ve got a pension that will give me £7,500 per year when I draw on it, so that means it’s wealth of £150,000. So I now have to pay £5,000. How? I can’t get at it for another 15 years. So, liquidate it early and get £50,000. And then how to I pay to stay alive in… Read more »
It’s insane. Especially with the £500k per person including pension and property that has been run up the flagpole. The conservatives are fucked anyway, but with this they’re setting themselves up for a gonzo gangbang.
Excellent stuff Tim. A clear voice in the madness.
Good analysis; one possible flaw – just because it’s observed to be a disaster is insufficient reason for lefties not to copy it. The USA had compregensive schools for decades before Wilson and Crosland introduced them in the UK
Politicians rarely take note of a poor policy outcome elsewhere… because this time ‘it will be different’.
The Americans tried a similar thing back in 2010. The idea was that the Americans who live abroad have loads on money and if they only knew just how much, they would be able to tax it and fund public services. The estimate was that it the money offshore was taxed properly, it would bring in $300 billion a year. A law called FATCA was introduced and the USA forced most of the countries to agree to implement it so they could find out where all the Americans had put their money. A charitable estimate shows that less than $800… Read more »
Trump collected more tax by *reducing* tax rates so companies saw it more advantagoues to bring the money home.
And now, Biden has stated what he is going to do with all the revenue he is going to “raise” by undoing that move.