What do you think of this idea of a wealth tax?

[LuluJakey1]

This is from The Guardian this afternoon. It is the third article I have seen in the Press two days promoting this idea.

www.theguardian.com/commentisfree/2020/jul/06/arts-wealth-tax-rishi-sunak-nhs-public-services?CMP=Share_iOSApp_Other

Personally, I think it is bonkers. She seems to be suggesting that ALL wealth in this country - houses, savings, pensions, shares/paintings etc should be subjected to a one off tax of 10% to get us out of the financial mess.

DH and I would have to find about £80,000 cash! We'd have to sell the house?

Yes- Yes it is a good idea and you are BU to criticise it.
No- It is an awful idea and you are right to criticise it.

@MrsHuntGeneNotJeremyObviously

Your post is astonishing entitled and blind. You are saying:

1. Your adult kids should pay more tax but you shouldn’t contribute from your wealth
2. Your adult kids can’t financially support themselves even but they are more culpable for this bill than you and your wealth
3. You should be left alone in peace to enjoy your “luck” and wealth and someone else should pay this bill.

Just wow 🤣

I think perhaps a one-off tax on wealth over a certain amount (say £500k ish) could work, if it was done properly. I think pensions should be exempt though. Or at least up to a certain amount.

You do realise that for a lot of people £500k buys a very average house, or for some a flat.

Not at all dissing your region or homes etc, but Jeremy Corbyn was banging on about high earners on £80k+ and while it’s a decent enough wage in London, it’s certainly not putting anyone into high roller territory.

10% seems on the face of it to be fair, but soooo many won’t have anything like that in liquid cash or accessible assets!

No, this scheme is yet another pie in the sky, they will raise taxes and cut the triple lock as a starting point.

France has a Wealth Tax

It also has a wealth drain as people who start to become part of the wealthy leave taking with them any income tax they would have paid in their earnings

TomPinch I was trying to point out that for all his qualifications and awards Thomas Piketty hadn’t really done his research and to quote him as a means to back up an argument for bringing in a wealth tax was pretty flawed.

I don't see a reoblem with a capital gains tax on property - paying 10% of any increase in value your property has had since you bought it, when you come to sell it. No increase in value, no tax. Decrease in value, no tax. Increase in value from £290K to £390K, you pay £10K capital gains.

I don't see a reoblem with a capital gains tax on property - paying 10% of any increase in value your property has had since you bought it, when you come to sell it

I can see a huge problem with this. If you are relying on people then to actually sell the house.

All that will happen is people just wont sell.

Firstly, I don't have any wealth. I'm still paying a mortgage on a house that hasn't gone up in value. If it did, it's not the same as having money in the bank - the increase in value only means something if you sell it. And having paid tax on earnings and stamp duties and mortgage, yes I do feel entitled to enjoy any increase in value and not have that further taxed.

Secondly, I am using my money to help my kids who are in work/study which isn't well paid. They are likely to earn more in the future. So I support them a bit now and later on they will also be paying more into the system. Which benefits society. Alternatively they could be on the dole or in jobs below the tax threshold and never contribute. So I feel like I am doing my bit both for my children and society as a whole.

My point is that you can't expect people to pay for everything - most are already paying tax, helping support adult kids through uni or topping up wages, paying mortgages (which mortgage company is taxed on), paying childcare, paying tax on everything they buy. There is a limit on how much it is fair to tax people. 10% of their value in addition to all the above is beyond that limit

I hope they don't go over widowed parents' life insurance that is to support our kids. Theresa May already brought in changes so that for the first time in 70 years the country actually profits from a parent dying. The parent who died paid tons of NI and tax but will never get years of state pension/use of NHS that others will get and due to tory changed widowed families get no support at al after the first 18 months.

Go after not go over

I think people would still move - putting a capital gains tax in place may even help stabilise the property market. Why wouldn't you move if you bought a house for £50K in 1980 and it's now worth £350K, and you would get £320K from the sale. If you'd spent £300K improving the house so it's now worth £350K (unlikely) you wouldn't have to pay the CGT, but otherwide this extra £300K you've accumulated is due to nothing more than you staying put for 40 years.

If you're saying people wouldn't move because they'd have less money to go towards their new home, I think there'd probably be a readjustment in house prices to reflect this.

However, maybe it should be limited to a tax on all property as part of a deceased estate - that way people couldn't complain that money they had accrued due to hard work etc was taxed further on their death.

There's lower hanging fruit than this that would potentially be less of a vote loser. Not saying I agree with all these, but I would be looking into:

Capital gains tax - scrap entrepreneurs relief. It's ridiculous that you can pay 10% tax on up to a million pounds worth of qualifying gains. It doesn't work as an incentive because most people sell or pass on as a necessity rather than because of the low tax rate.

Go back to the cgt rate following the income tax rate, so rather than 10%/20% or 18%/28% it would 20%/40%/45%. Reduce the annual exemption down to around £5k.

VAT you could have some fun with - there's a strong argument here to reduce the main rate to help stimulate the economy, but a higher 'luxury' rate also has some appeal.

Scrap dividend rates - tax them at the main rates. Keep the £2k dividend allowance; avoids faffing with those who may have a small amount of shares (say from work schemes) having to self assess.

Increase in personal tax rates - I think most people see this as inevitable anyway.

Increase in corporation tax rates - as above.

Mind you, it can be counterproductive to have tax rates too high...if you want to get the economy moving you want people to have money to spend.

No point saving the arts for them to then become unsustainable because noone has the discretionary spends to enjoy them.

A limited time wealth tax on unrealised gains at a very low rate - say 2% per annum over a period of three years might be feasible, following the principles of capital gains tax (so own house isn't included, and there's an annual exempt amount etc.). I suspect in practice it would be too much hassle for the returns.

AlpineBell

This is a Guardian journalists fantasy.

Prolly Toynbee has been trying to float this idea for years.

I think governments around the world have seen what happened to France who went ahead with a wealth tax at a fraction of the 10% Polly Toynbee is advocating and seeing what happened there is a warning.

If they go after widowed parents' life insurance i think it'll push people over the edge and we'll see suicides. We have it hard enough as it is

Ok thanks 10:49Oliversmumsarmy

@Coldilox

I’ve just sold my house for £100k more than I paid for it 8 years ago. It went up by more than 50%. True it’s all going on a hefty deposit for a different house, but that’s not money I’ve earned. It’s not unreasonable to pay tax on that (not that I particularly want to!)

I think perhaps a one-off tax on wealth over a certain amount (say £500k ish) could work, if it was done properly. I think pensions should be exempt though. Or at least up to a certain amount.

I do think wealth should be taxed, not just income.

But what is “wealth”. Every penny that DH and I have is money that we have earned and paid tax on (at 40% for DHs earnings). We have never inherited or been gifted anything and are very unlikely to in the future.

We own our house having worked hard to pay off the mortgage. We don’t want to sell it and get somewhere smaller, (what IS smaller than a terraced house?) we’ve invested time and money in it and every bedroom is slept in (one only outside of term time currently).

I feel that a tax on our “wealth” would actually be a tax on our hard work and prudence. If we had spent every penny on high living, wine, foreign holidays, fancy cars etc then there wouldn’t be anything to tax. It would be a punishment for sensible living and planning for the future.

I can't imagine a version being implemented that didn't exempt wealth under a certain figure.

For a while now, I've thought we were going to end up doing this sooner or later simply because there's only so far that earned income can be squeezed. The effects of the pandemic have only exacerbated this.

but otherwide this extra £300K you've accumulated is due to nothing more than you staying put for 40 years

It is a bit more than that.

You have had to maintain the house, now the lawn, pay the mortgage, council tax, all the bills.
We have seen what happens in France where houses are left to rot or just don’t get sold.

All it will mean is less houses on the market or people keeping the houses in the family.

Meanwhile if you don’t buy a house, don’t get a job and expect the state to look after you. There is no penalties.

If you gamble away everything or spend your money on having a great time then the state will step in to help you.

We have had something like this before where savings were taxed and it nearly bankrupted the country as nearly everyone who had anything left. I don’t think anyone really wants to relive those days again.

Might have guessed that this was Polly Toynbee's idea !

The problem with all this talk of a wealth tax is no one knows how it will be applied. And the moment it comes up, everyone assumes they're going to have to hand over 10% of the value of their house. This is preposterous.

Far more likely, it will be based on assets over a significant amount either cumulatively or by asset time.

Homes in which people live are likely to be exempt or, at most, might be taxed a percentage on the equity in those homes. [Because realistically, the entire financial system would collapse if the vast bulk of homeowners, with mortgages and homes valued at less than £1mn or whatever, suddenly had to free up capital].

The chances of pensions being included are, in my opinion, almost non-existent as it would cause the kind of outrage that is impossible to recover from . But other liquid assets are likely to be fair game w(with proviso above that it would depend on total existing wealth as above).

I've long maintained there are other taxes that could help the NHS - eg a minimum fee paid for all visits to GP. This could be waived on a mean tested basis for specific individuals but I think it's reasonable to say that the vast bulk of the population could afford a tenner when turning up to get our moles checked / asking about new contraception etc. You could also tax the wealthy by increasing VAT/tax for certain items - new cars, alcohol, holidays, homeware, appliances etc. Even clothing, certain food etc.

Personally, I think finding ways to close loopholes for tax avoiders - both personal and corporate - would be a much more useful tool. However, it's surprisingly difficult to do this. I worked on project linked to some work a tax lawyer had done for HMRC. His work was, on the surface, relatively minor and honestly, a sort of "duh - of course that's how it should work" project. And yet... it had been this absolutely massive project, with multiple lawyers etc etc because the tax system is so bloody complex. Finding ways to close loopholes for Amazon etc is, in my opinion, imperative*, but unlikely to be particularly easy.

*I love Amazon. I think they employ lots of people and facilitate many small businesses. If they are not legally obliged to pay tax, I completely understand why they don't. But I DO think that the UK government should be making it so that companies like them DO pay tax.

The problem with all this talk of a wealth tax is no one knows how it will be applied. And the moment it comes up, everyone assumes they're going to have to hand over 10% of the value of their house. This is preposterous

From what the piece said it did sound like she was trying to say hand over 10% of your assets now would be a good idea

A tax on home equity is essential a tax on Londoners. Many of whom are very poor and struggling already and may be on zero hours contract minimum wage.

London property is crazily expensive and renting is even more unaffordable. I know people will say then they should all move out of London, but we are talking about millions of people who couldn’t all do this and it isn’t always that easy to leave your family, support network, job etc. to move to a totally different part of the country.

Just as an example, do you think a family living in this 2 bed ex-council flat can manage to pay £40k tax?
www.rightmove.co.uk/property-for-sale/property-89108153.html

What about a family who has been saving for years for their deposit and finally managed to buy a small family home with a huge mortgage. They are likely to be right at the edge of what they can afford and won’t be able to produce another 10% of their deposit to pay in tax or afford to increase their already huge mortgage.

Personally, the idea of taxing homes terrifies me as I just can’t afford it. We live in a small flat with no outside space in a fairly rough area, but it’s probably tripled in price since we bought it, just because London prices are insane. I don’t work currently due to severe health problems, which means our household income is a bit low and would make moving to a different area very very difficult.

We’ve been wanting to move locally for a while because this flat is increasingly unsuitable for my disabilities (lots of internal stairs and narrow awkward spaces and bathroom is in the basement). So we have been saving for a few years to cover the insane cost of estate agents and stamp duty.

If we have to pay 10% of the money we have saved to make moving to a suitable home possible and 10% of all the equity in our flat, then we will have to try to get a second mortgage based on just my husbands income and even if the bank allowed this, we would struggle to manage the payments when interest rates inevitably rise. We would basically be f**ked!

From what the piece said it did sound like she was trying to say hand over 10% of your assets now would be a good idea

That's ONE columnist. In the Guardian. I've read pieces about this in The Times and the Financial Times as well. And not one of them has said what the government has indicated it will do, only that there is "talk" of such a tax.

Business editor at the Times claims most proposals suggest that they'd be on assets minus borrowings, excluding pensions and primary residences.

Labour claims that a wealth tax is necessary, but have given absolutely NO guidance on what this might look like.

The FT seems to write about it constantly, but has absolutely no guidance on what it would look like, pointing out that the challenges of taxing individuals on the homes they live in or their pensions are massively significant.

So yes, a wealth tax is being talked about. It might even come into being. But hysterical fears that someone with a £245k house and a £200k mortgage having to find £24,500 in cash within a few weeks are blatantly ridiculous.

If we were to be taxed on increase in equity wouldn’t people set up limited companies which would be the “owner” of their home then claim back any money spent on the property against the asset value. Then when they came to sell because you would be spending the same amount or more on any asset there would be nothing to pay.

@BlingLoving

This is what worries me. Our money is just sitting in a bank account, waiting for us to use it to buy a house. House buying has been postponed because DP is redundant. It would be day for them to take 10% if it.

Easy for them, not day for them.

@TheDogsMother

Might have guessed that this was Polly Toynbee's idea !

It wasn't! She's writing about an idea that's being discussed, she didn't invent it.