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Chapter 1: Why are wealth taxes controversial?
Okay, welcome back to Gary's Economics. Today we are going to talk about why the economist hates wealth taxes. Okay, so wealth taxes are kind of indirectly on the cover of The Economist this week. Don't buy it. It's rubbish. Watch this instead.
Chapter 2: What is the difference between inheritance tax and wealth tax?
I don't normally read The Economist, but I have recently been interested in sort of what the intelligentsia are thinking about wealth taxes because they are currently the primary blocker of wealth taxes. So I really wanted to know what The Economist was saying I knew they were going to be anti-wealth taxes. But I wanted to know, you can see there's Zach Polanski and Zohra Namdani on the front.
I wanted to know what the arguments they were giving were. And I had to read, there's two articles in there about wealth taxes.
Chapter 3: Does taxing wealth deter innovation?
And I found the arguments given like incredibly, incredibly interesting. All right, so yeah, there's two articles in there. They don't really give much argument against wealth taxes, but I want to go through everything they say specifically about wealth taxes. So the first thing they have is a very short sentence which says, wealth taxes would become confiscatory and deter innovation.
And then they refer to like a larger article at the back of the magazine. And if you go to that larger article, to be honest, there's like almost nothing in it. It just says the exact same thing. The costs of deterring innovation are vast. Seizing the assets of society's most productive people is a road to economic ruin.
Chapter 4: How does The Economist view wealth taxes?
But the most interesting thing that they said, I will get into those specific arguments later, but I really want to focus on the one specific thing they said next, which I found to be really, really interesting, which is this little bit at the end of the article.
Chapter 5: What criticisms do intellectual elites have about wealth taxes?
where it says the tax system must ensure that meritocracy prevails over inheritocracy, broader based inheritance taxes. And when I heard this, I found this incredibly interesting and I'll explain why. So in the last one year, I've been doing a lot of basically lobbying of kind of fancy people, politicians, economists, academics, tax lawyers, trying to convince them to do wealth taxes.
Chapter 6: Why do some argue against wealth taxes in favor of inheritance taxes?
And this exact argument which the economist makes here in in this week's edition that no we definitely shouldn't do wealth taxes and it's very very clear in this article and in previous articles they've published that they're very anti-wealth taxes this idea that we shouldn't do
wealth taxes but we should do more inheritance taxes is an idea that i find so interesting and has come up a couple of times in the conversations that i've had with sort of powerful sort of influences in the political world here in the uk and every time i've heard Somebody say to me, oh, we definitely shouldn't do wealth taxes, but what I really want us to do is more inheritance taxes.
I find it like an incredibly interesting line of argument to take and
Chapter 7: How do wealth taxes impact ordinary families?
In order to understand why it's so interesting, you basically need to understand what wealth taxes are and why wealth taxes are so important in our current economy. So the difference between a wealth tax and an income tax is income taxes tax you on the money you make every year, whereas wealth taxes tax you on the stock of wealth that you have.
And the reason that they're so important in the current tax system is our current tax system as it is, is very effective at taxing primarily high earning workers. So if you are making your money from your work and you're earning a lot of money, you're probably paying 50 or even 60%.
At the moment, the highest marginal rate of tax in the UK, if you include everything, including student loans, is more than 70%. So we're aggressively taxing high earners
Chapter 8: What is the future of wealth taxes in society?
but we are really not effectively taxing the very rich. People have enormous amounts of assets at all. So wealth taxes really are the only tax that has the power to really rebalance the current very unfair tax system. I think if you look at Zuckman's work, he talks about ordinary workers are paying 50%, billionaires paying 20%.
Wealth taxes, because they tax your stock of wealth rather than just your income every year, They effectively get around this problem that we have, which is very rich people don't get their money from working. And because we have a tax system that is largely based around taxing work based income, very rich people are generally effectively able to almost completely avoid tax.
And this is very important within the context of what is currently happening to the wealth distribution in our economies, in our societies, which is most groups of society, poor people, average people, and even higher earning individuals,
are getting poorer, governments are getting poorer, ordinary people are holding less wealth, governments are holding less wealth, and all of that wealth is being accumulated amongst the richest people in our society.
Now, when we can see that this is the way that wealth is being moved throughout society, it's really, really important that we introduce a tax into the system which can effectively target not just high-earning workers, but the very, very rich. And if we don't do that, wealth will continue to be squeezed out of ordinary families and will continue to accumulate in the very rich.
It's this shift in wealth which is basically driving living standards down. If we want to drive living standards back up again, and if we want ordinary people to again be able to own assets, own housing, we need something in the tax system which is able to squeeze wealth back out from the very rich.
it's very very difficult to do this with taxes on income alone because very rich people if you start to tax their income at very high rates you know you know even if you were to tax their income at 100 number one they could simply stop receiving their income you know it has very bad negative economic consequences And two, it's not going to squeeze wealth back out of that group.
The only real way you can get wealth out of this basically billionaire class who is accumulating the wealth is to tax the stock of the wealth itself. So if you are an ordinary family and you are worried about the ability of yourself or your kids to own assets in the future, you really do need to be supporting a wealth tax or some sort of tax on the stock of wealth.
This is the only way that we can get wealth back into the hands of ordinary families. And The Economist essentially recognised this in what it says. It says that the tax system must ensure that meritocracy prevails over inheritocracy. So this is the system that we're in.
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