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Social Justice

Is it time for a wealth tax?

As new figures show billionaires’ wealth has ballooned by £150billion since 2020, campaigners have launched a fresh call for a wealth tax. Here’s what that means and how it could work

The image of Scrooge McDuck diving into a pool of cash is a simple way to think of money being hoarded by a small number of super-rich but, as inequality widens, the image may be growing closer to the truth. And as its relevance grows, so do calls for a wealth tax.

Billionaires in the UK have more than £653billion of wealth between them, with that figure increasing by £600bn since 1990, according to the latest research by the Equality Trust.

Meanwhile, millions of people across the UK are struggling to afford food for their family and heat their homes. 

Charities, campaigners, and even millionaires are among a growing chorus of voices calling for a wealth tax as a way of addressing both these issues at the same time.

As the world’s richest gathered in Davos for the annual meeting of the World Economic Forum, over 200 millionaires signed an open letter calling for global action on extreme wealth.

Jo Wittams, co-executive director of the Equality Trust, said: “That we have allowed the very richest few to accrue such a staggering amount of the nation’s wealth is a national disgrace.

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Here’s everything you need to know about a wealth tax, how it would work and why campaigners are calling for it in the cost of living crisis.

What is meant by a wealth tax?

When you think of tax, you’ll likely think of income tax, or tax paid on money earned. But there is a substantial amount of wealth simply accumulating, sitting in the offshore accounts and bank balances of the super-rich, appreciating in value in the form of property portfolios or company stocks and shares. This money isn’t entering the economy to help it grow and is not subject to these kinds of taxes. 

A wealth tax is a “broad-based tax on the ownership of net wealth”, according to policy experts at the Wealth Tax Commission. It is a tax on most (or all) types of assets that a person owns, rather than a levy on a specific type of asset like property. Net wealth means a person’s wealth minus any liabilities or debt.

The UK does not have a wealth tax as such, but some assets and property are subject to tax laws. Buying property may be subject to stamp duty land tax, selling expensive items may be subject to capital gains tax, and the value of someone’s estate when they die may be liable to inheritance tax.

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Who is calling for a wealth tax?

The Wealth Tax Commission was established in Spring 2020 to provide in-depth analysis of proposals for a UK wealth tax. Its report was published in December that year following work by a network of world-leading experts, including economists, lawyers and accountants. The commission proposed a one-off tax on the richest people in the UK.

Following this, in September 2021, Labour MP Richard Burgon MP tabled a motion calling on the government to “introduce a wealth tax as a progressive alternative to raising taxes on working people”. The government continues to oppose the idea, and Labour has not committed to the policy either. 

The campaign is backed by a number of MPs who are continuing to push for a tougher tax on the rich in the cost of living crisis, including former Labour leader Jeremy Corbyn, who said in December 2022 that a one-off, one per cent tax on households with more than £1 million could fund a pay rise for nurses “162 times over”.

Other groups calling for the tax include the Equality Trust, Tax Justice UK and even a group of 30 millionaires who asked Rishi Sunak to introduce a tax on the nation’s richest people when he was chancellor. 

The group “Cost of Extreme Wealth”, which includes UK-based millionaires as well as US figures such as film star Mark Ruffalo and Disney heiress Abigail Disney, has used the 2023 Davos meeting to call on political leaders for action.

“Tax the ultra rich and do it now. It’s simple, common-sense economics. It is an investment in our common good and a better future that we all deserve, and as millionaires we want to make that investment,” the group said in an open letter.

The Conservative government’s position on a wealth tax is clear – it isn’t needed. Lucy Frazer, the then-financial secretary to the Treasury, said in 2022 that the UK has “several different taxes on assets and wealth” and “is among the top of the G7 countries for wealth taxes as a percentage of total wealth”. Frazer also said anybody wishing to pay higher tax could do so voluntarily.

How would a wealth tax work?

One idea for a wealth tax is a one-off levy, floated by the Wealth Tax Commission as an “exceptional response to a particular crisis”. This would involve wealthy individuals paying a sum in instalments.

The commission, published in 2020, found that a one-off tax payable on all individual wealth above £500,000 (after mortgages and other debts) and charged at 1 per cent a year for five years could raise £260bn. This threshold would mean 8.2 million people being taxed.

For context, this would equate to around a tenth of the UK’s annual GDP of £3.1 trillion, with proponents arguing it would be a step to achieving a more even distribution of wealth and to eradicating poverty. To raise an equivalent amount of money would require a 9p increase in the basic rate of income tax, according to the BMJ.

Alternatively, the commission suggested an annual tax could be introduced – although it advises the government to reform existing taxes on wealth instead. “An annual wealth tax would only be justified in addition to these reforms if the aim was specifically to reduce inequality by redistributing wealth,” the researchers said. 

Tax Justice UK is calling for the government to introduce tax reforms targeting the very wealthy. These measures include equalising capital gains tax with income tax, scrapping the non-dom regime and introducing a 1 per cent tax on people’s assets over £10million. The group argues the government could raise up to £37bn per year in taxes on wealth.

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A spokesperson for the campaign group said: “The government knows this. They know that wealth taxes could be introduced on the super rich. They know this money could be used to pay nurses and other public sector workers properly. They know the strikes could be averted. And yet they choose not to tax wealth. 

“Doing nothing as the UK enters huge industrial disputes is a political choice on the part of the government. ​They are to blame for the disruption and upheavals that will be felt in the coming weeks and we must hold them to account.”

The Big Issue’s #BigFutures campaign is calling for investment in decent and affordable housing, ending the low wage economy, and millions of green jobs. The last 10 years of austerity and cuts to public services have failed to deliver better living standards for people in this country. Sign the open letter and demand a better future. 

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