Monday, 10 December 2012

The case for a Wealth Tax

Though Britain is currently undergoing what is termed an "age of austerity", it is an austerity that certainly does not apply to the most advantaged, or to those responsible for financial crash that caused the ongoing recession, or virtual depression, of the economy.

The UK is unmatched for increases in its income inequality among all other developed nations since the 1970s. Appropriate to the country's Dickensian neoliberal political orthodoxy, according to Professor Danny Doring of the University of Sheffield, the amount of adjustable wealth owned by the UK's richest one percent is almost equal to what it was in the year 1918.

While the poor and vulnerable suffer austerity to pay for the expense of a financial insecurity, primarily the consequence of the £1 trillion bailout of the City of London's financial firms, the Labour Party MP Michael Meacher notes that the UK's wealthiest 1,000 persons have increased their collective wealth by £155 billion since the crash. While rejecting the concept of a Mansion Tax proposed by their Liberal Democrat partners, David Cameron's Conservative-led coalition government has incidentally introduced what has been termed a Bedroom Tax on social housing tenants, turfing thousands out of their homes for having one too many bedrooms, and surely almost irreparably fraying swathes of social fabric in the process.

According to a report by the independent Office of National Statistics, the richest 10% of the UK's population owns 40% of the country's entire £10.3 trillion worth of national wealth. They are 850 times wealthier than the poorest 50% of households. Income tax alone (which the Cameron government has cut for the highest earners) is inefficient in addressing economic inequity, given that tax relief is permitted for private pensions and trust funds. 

In countries including Iceland (which has made the financial institutions that caused its financial crisis to pay for it rather than its people), Switzerland (which is hardly a Soviet Republic in regard to tax policy), Norway (one of the most highly developed countries in the world), and France, a wealth tax is levied on the cumulative assets of the most fortunate, going by the varying names of an Equity Tax, a Capital Tax, and in France (straightforwardly) a solidarity tax on wealth. The most latter yielded €4.42 billion of government revenues in 2007.

The starting assets to be part of the UK's richest 10% is according to this ONS report £967,000 and above. Generally speaking, Wealth Taxes in other countries have varying rates, with those at the starting rate paying fairly substantially less than multi-millionaires and billionaires. In France, for example, this ranges from 0.55% to 1.8%. A Wealth Tax applied to Britain's wealthiest therefore warrants a more detailed analysis on what its rates should be; but we can consider the revenue raised from a hypothetical flat rate of 1.5%. A 1.5% levy applied to the £4.12 trillion of wealth the richest 10% own would raise £61.8 billion a year. This is more in one year than all of the cuts made to public services and welfare combined by George Osborne's treasury so far. In two years, this would raise more (£123.6 billion) than all of the cuts made so far, and all of the cuts that are planned to be made over multiple years. "Austerity", clearly not applying to the most providential, of which we are told there is no alternative to reduce the national budget deficit and structural debt (caused by the £1 trillion bailout of financial firms, which we can assume that many within the richest 10%, and probably 1%, have prospered from). With the rates of the wealth tax varying, it would more subjective generality raise £60-70 billion per year.

Britain would still remain the second most economically unequal country on the planet. The richest 10% would still own nearly £4 trillion of wealth. But the fact of how much the Wealth Tax would raise exemplifies our endemic inequality; and clearly dispels the ideologically-driven lies that attempt to justify social immobility and deprivation for the whole of wider society. 

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