The monetary merry-go-round is about to start, with chancellor Rishi Sunak preparing to step up to the despatch box on Wednesday to deliver the next UK budget.
Details are starting to emerge, with £6bn ($8.2bn, €7.1bn) earmarked for the NHS, £1bn for the court system, ending the public sector wage freeze, £7bn for transport, and £850m for museums and galleries.
But, as with all things, it comes down to how will it be paid for?
Broadest shoulders
Earlier this year, to the disappointment and disbelief of many, Sunak announced a 1.25 percentage point increase to National Insurance contributions.
This money is to be ringfenced to pay for the staggering and rising cost of social care.
The additional levy will fall across all working age individuals but weight heaviest on those at the lower end of the earning scale.
At the time there was outrage – which seems to have petered out but will likely blaze back to life ahead of its implementation in April 2022.
The rich have gotten significantly richer during the pandemic; while, at the other end of the spectrum, people have borne the brunt of furlough schemes, redundancies and wage cuts.
If the answer to the question of how to balance the country’s books is to place the burden on the broadest shoulders – the logical conclusion is that wealthy people contribute more.
Yes, progressive income tax rates mean higher earners already pay more.
But when it comes to gathering resources, the obvious place to start is where there is the greatest abundance.
So, why don’t we have a wealth tax?
‘Proud to pay out taxes’
In an open letter to Sunak ahead of the budget, 30 UK-based millionaires called for the government to “tax wealth holders like us”.
“We understand the immense pressure on the Treasury to deal with crises both present and future – from inequality, to covid, to climate change.”
They added: “We are proud to pay our taxes to reduce inequality, support stronger social care and the NHS and to ensure that we’re building a more just and green society.
“The cost of recovery cannot fall on the young or on those with lower incomes. There are many of us – people with wealth – who will support a more progressive system of taxation and we urge you to do the same.”
Rich people are telling the government that a wealth tax is the way to go.
So, I ask again, why don’t we have one?
Lost cause?
The simple answer is that the government doesn’t want to implement one.
Yes, 30 millionaires are ready, willing and able to pay more tax. But there are significantly more than that residing in this country.
Also, let’s be frank, rich people donate to political parties.
And it’s not just the UK government that seems less than eager to impose a wealth tax. Few countries have ventured down that path.
So, while it may be the most logical step – it is highly unlikely when the political will isn’t there to implement it.
Which brings me back to the headline. Rather than call on the government to introduce something it has shown little inclination to address – perhaps it’s time to look at other, less direct measures. Such as further changes to:
- Inheritance tax
- Capital gains tax
- Pensions tax relief
- Income tax
As I type, I can already hear International Adviser readers having a go at me for suggesting even more changes to tax reliefs and allowances.
All of the above have been tinkered with ad infinitum. But more could be done through these avenues to shift the burden onto higher earners and wealthy individuals.
We can also get more creative. Or, crazy suggestion, get international tech giants to pay their fair share of tax… River in South America, I’m looking at you.
You could argue that it’s akin to death by a thousand cuts. But it’s also politically more palatable and serves as a solid foundation for the government’s ‘levelling up’ initiative.
Is a wealth tax the right way to go?
Yes.
Is it likely to happen?
No.
So, it’s time to figure out another way to achieve the same goal. This is, after all, politics.
