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Chapter 1: What is the main topic discussed in this episode?
A wealth tax feels like a simplistic cop-out.
The power that they confer, power to influence politics in the way that Musk does, creates dynasties a bit like the pharaohs of Egypt. Well, they are interfering in British politics.
They are, but the answer to that isn't tax. There's nothing our tax system could do to stop that. On the other hand, we could have had a rule that said people living outside the UK can't make political donations. You could have done that, didn't do that.
The wealth inequality can't be solved simply by tweaking capital gains. What is your view on this idea then, Dan? We're delighted to say that this year the rest is money is powered by Octopus Energy. So we're joined by its founder and CEO, Greg Jackson. So Greg, I heard that the prices of solar and home battery storage are falling. So is it worth waiting before you invest in them?
First of all, we never know what's going to happen to the future price of energy. It could go up or go down. So I think when people try to do a really detailed payback calculation, the problem is you don't really know what the alternative is.
But I don't know many people who've regretted getting these technologies because the one thing, whenever you get them, is it helps insulate you against the volatility of the market prices. And so as far as I can tell, the vast majority of people who've made that decision are happy with it.
Greg, thank you very much. Now on with today's episode.
Hello and welcome to The Rest Is Money with me, Robert Peston.
And me, Steph McGovern. And back with us, Dan Needle. Thank you very much for joining us again. We love having you on the show. We wanted to talk to you today about wealth tax. How do you make sure the richest people in the world are contributing enough to tax?
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Chapter 2: How does Dan Neidle view wealth taxes?
Wealth tax, it's a pure talking shop. It really annoys me.
Zucman and also, you know, Thomas Piketty, who we talk a lot about in terms of looking at wealth inequality, they both argue that the wealth inequality can't be solved simply by tweaking capital gains. You know, they talk about asset values grow so fast,
relative to GDP that a direct tax on the stock of wealth is the only way to stop, you know, I guess this plutocracy that we see and this wealth inequality. But you disagree, though. You think capital gains could be the way to get more equality when it comes to how much tax billionaires pay.
I, in the end, I'm not an expert in inequality, but I kind of think Zuckerman and Piketty aren't either. They are obsessed with tax as an instrument of addressing inequality and about financial equality. When I read people like Angus Dayton, not the comedian, the other guy, and what they write about inequality, I'm struck by how little they talk about tax.
The whole of the academic inequality literature is much broader than that. It looks at education, skills, family background, geography, health, transport, labour market, political power, housing, inheritance tax, all of these other things which are critical to inequality and the problems which society faces. A wealth tax feels like a simplistic cop-out.
OK, so what about we also had Mariana Maticato on the show recently, who, again, another brilliant economist. And she was talking about how actually we need to think less about redistribution. So this sense of tax and instead think about pre-distribution. So, you know, looking at inequality before you get to the point where people are taxed on what they've made.
Is that what you're saying then that we need to think about that?
This is all not my expertise. So I'm not going to say too much other than the fact that some inequality experts spend all of their time talking about tax and no time talking about the other very obvious drivers of inequality rather bugs me.
But I think it's also important to say that we're slightly confusing two different things. An equalisation of income tax and CGT rates. And were we to see national insurance just rolled into the income tax system, all of that might well produce a fairer system. It would raise a lot more tax from people who are very well off.
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Chapter 3: What are the criticisms of the billionaire tax proposal?
And they're too much for two reasons. But the fundamental one is the power that they confer power to influence politics in the way that Musk does, but also power that trickles down through the generations. If you're lucky enough to inherit even. I don't know, 5% of Musk's wealth, you yourself will be massively wealthy and massively powerful.
It creates dynasties of, you know, a bit like the pharaohs of Egypt. And people, you know, the argument is this is just bad for society to have power. You know, when you have concentrations of money on that scale, you also have concentrations of power. And that is bad for all of us.
I completely see that. I don't. I'm going to go out on a limb and say I think Elon Musk is a bad person and has too much power. Is this a problem in the UK? Do billionaires have significant political power in the UK to a dangerous degree? Not clear to me that's true.
There is a topical version of this. I mean, you know, you pay money, takes your choice whether you think, you know, this is too much power or not. But a couple of billionaires and, you know, particularly operating in the crypto space, have given a lot of money to Farage and reform. That is power, right?
Not British. They're not here.
No, but they are interfering in British politics. They are, but the answer to that isn't tax. They are British in the sense that they are able to make the donation. Otherwise, they wouldn't be able to make the donation at all.
There's nothing our tax system could do to stop that. On the other hand, we could have had a rule that said people living outside the UK can't make political donations. You could have done that, didn't do that. A lot of the talk in this whole area is obsessed with tax when tax is not the best lever for it.
From the example you've given of California, what you're saying is as soon as people get wind of this, they would leave and go somewhere else. But isn't that based on the assumption that all anyone cares about, all these people care about is money?
Because, for example, like Piketty and Zuckman both say it's totally overblown this flight risk element to it because, you know, this would be rich people having to uproot their families and, And the UK is a great place to live. So is that are they just going to turn their back on the wonderful country we have here just purely to pay less money elsewhere?
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Chapter 4: How does wealth inequality affect political power?
Go on, give us your thoughts on the latest announcement. Tell us what it is and how it works and why you hate it.
Early June, Thomas Piketty and about 40 people came out with a proposal for basically a worldwide economic revolution. They were to cap the growth of rich nations, basically to nothing, cut working hours in half, cut material consumption by about 30%. 10% of all of our spending would go to other countries. Basically, a multinational world government is their proposal. And...
Again, it just strikes me as potty. There can't be anyone who thinks this is actually going to happen. Forty economists could have spent their time designing actual improvements to real world tax and economic problems. And instead, they're engaging in the equivalent of fantasy football. I'm just amazed by the whole thing.
Well, they will have their supporters. And so I'm pretty sure that what you've just said will attract a bit of attention. But I don't think you're going to get... Are we going to massively push back on behalf of Thomas Piketty, Steph?
The only thing I would say is... We've got to have people challenging the status quo, haven't we? And that's what they're doing. And maybe that might resonate with lots of people who then get behind them. And you don't know what... Someone needs to start somewhere, don't they? And so we shouldn't dismiss people who come up with these ideas because things do need to change.
Inequality is getting worse, particularly in this country. So maybe those kind of radical ideas are the ones that we should give more time to. Dan, rather than calling people potty.
We should totally dismiss it and spend our time on useful stuff instead. I mean, it's bonkers. It contradicts itself.
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Chapter 5: What alternative solutions does Dan suggest for wealth redistribution?
So it only works if you have unprecedented global cooperation, electorates voting to make themselves poorer. Do you remember a few months ago, tariffs were a bad thing and only lunatics imposed tariffs? So this report says that if China, the US and other countries don't accept a world government ordering permanent cuts in the living standards, then we impose tariffs on them.
180% tariffs on China, they suggest. 180%.
And then obviously China would retaliate with something equally as alarming.
How much space does the report spend considering the consequences of these tariffs? Nothing. Doesn't bother. It's all very glamorous and gets you invited to cool parties and lots of funding. But how much better it would be if instead they looked at actual micro problems and how to solve them?
Look, I've got to admit, I'm not immersed enough in the Piketty proposal. Your characterisation of it does make it seem to me like essentially a talking point, as Steph says. But Toma, if you are listening, come on the podcast and explain yourself.
Excellent. Right. We should wrap things up there, Dan, as ever. Thank you very much. That's it from us on The Rest Is Money. Bye bye. Goodbye.
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