Wealth Tax in the UK

[ClaytonBlackmoorLeftPeg]

No, not extremely

agreed - what do we then consider a footballer who earns £150k per week...

 

[Jippy]

Yeah if anything like that was done I'd like to see employee bonus payments as deductible. Tesco is a good example, profits up if memory serves around 30% half yearly and yes they gave bonuses out but a fair chunk also went to dividend payments.

If you're going to tax anyone the likes of Tesco gained those profits as a result of state policy. Is it workable to target taxes in this way? I'd very much doubt it but it's a good discussion point.

Tesco benefited from us not eating out and working from home for sure, but I certainly wouldn't begrudge their shopfloor workers getting bonuses for working through Covid.

 

[sullydnl]

I would have thought the simple answer to "why don't they just target people with X million instead of people like me" is that they bring in more money by taxing people at the lower band too.

The reality is that just 1 in 10 people in the UK own more than one property. Meanwhile the 500k threshold being mentioned covers the wealthiest 17% of the UK's population. They might not be "rich" in the way they imagine rich people to be but they certainly aren't "average".

 

[Smores]

You're right. I didn't mean that to come across as a sponger hating post. My point was more that I don't think what a lot of people class as "Wealthy" is actually wealthy. People should be allowed to better themselves without getting penalised for it.

The world is in a very difficult time and IMO a fairer way to claw back some of the money is via the genuinely rich (Millionaires) and through a blanket increase to tax across the rest. If you earn under around 100-150K you are not super wealthy.

Yeah i agree with that, voters don't tend to sadly. They just rejected such policies.

It's the mechanisms that are at fault. We all accept that investing/saving is a luxury of success one which isn't inherently bad but at the same time i think disposable income should all be taxed fairly evenly between economic groups or even progressively. It just needs a minor change.

If you're going to claw back wealth or change the system it should be progressive but the argument on the lowest impacted is always going to be a shouting match of "not me".

 

[TwoSheds]

So hang on, if you have a million quid house you pay 1% (£10k) each year for 5 years or spread over 5 years i.e. £2k a year?

And that 1% applies just the same to billionaires as to people with an overvalued house? Or is there some sliding scale? Surely it has to be at least notionally graded doesn't it?

 

[Grinner]

What are the current UK rules on foreign investments ie rental homes?

 

[MikeUpNorth]

What are the current UK rules on foreign investments ie rental homes?

Do you mean non-UK residents buying property in the UK, or UK residents buying property outside the UK?

 

[sullydnl]

So hang on, if you have a million quid house you pay 1% (£10k) each year for 5 years or spread over 5 years i.e. £2k a year?

And that 1% applies just the same to billionaires as to people with an overvalued house? Or is there some sliding scale? Surely it has to be at least notionally graded doesn't it?

The Wealth Tax Commision report (which is the one I think everyone is referring to here) didn't recommend any particular thresholds or rates, they just layed out options that politicians would have to decide on.

Among those options were progressive rates rather than flat rates, where the amount payed would increase at different intervals. In which case the billionaires would be taxed more.

There's a document explaining the report's findings and reasonings here if anyone is interested.

 

[Grinner]

Do you mean non-UK residents buying property in the UK, or UK residents buying property outside the UK?

I mean a UK resident getting income from property held in the US. I'm assuming that there is a reciprocal agreement but here in Italy they still tax you over that amount you pay in the US. They also tax all accounts with over 5k in them.

 

[TwoSheds]

The Wealth Tax Commision report (which is the one I think everyone is referring to here) didn't recommend any particular thresholds or rates, they just layed out options that politicians would have to decide on.

Among those options were progressive rates rather than flat rates, where the amount payed would increase at different intervals. In which case the billionaires would be taxed more.

There's a document explaining the report's findings and reasonings here if anyone is interested.

Cheers dude

 

[Verminator]

Surely the only justifiable way to tax somebody on their ability to pay, is by taxing what they currently earn?

Hitting a pensioner, in a home that has increased in value, on paper, is more unfair than taxing someone who earns vastly more than they need to live comfortably. All whilst allowing corporations, registered elsewhere, to avoid paying the correct tax, on profits made in the UK.

Still, at least HS2 can get built, so that wealthy Londoners can buy cheaper houses, up north, but still commute.

 

[MikeUpNorth]

I mean a UK resident getting income from property held in the US. I'm assuming that there is a reciprocal agreement but here in Italy they still tax you over that amount you pay in the US. They also tax all accounts with over 5k in them.

Yeah, if you are UK tax-resident then the UK will tax you on your global income. Any tax you pay to a foreign government on overseas rental property (subject to some conditions) is allowed to be offset against UK income tax obligations, if there is a double taxation treaty in place with that country.

 

[Volumiza]

No, not extremely

Very wealthy then

 

[sullydnl]

Surely the only justifiable way to tax somebody on their ability to pay, is by taxing what they currently earn?

Hitting a pensioner, in a home that has increased in value, on paper, is more unfair than taxing someone who earns vastly more than they need to live comfortably. All whilst allowing corporations, registered elsewhere, to avoid paying the correct tax, on profits made in the UK.

Still, at least HS2 can get built, so that wealthy Londoners can buy cheaper houses, up north, but still commute.

Raising income tax would have more of a behavioural impact though, wouldn't it? It logically reduces incentive to work, whereas a one-off wealth tax doesn't have that sort of impact. I'm particularly unsure whether you want to raise income tax at a point where you'll be trying to get as many people as possible back to work after a period of record unemployment.

As for the logic in hitting pensioners more, the report argues that it is in fact fair:

"Those currently around retirement age have, as a group, benefitted from a period of strong house price growth, generous occupational pension provision, and healthy wage growth, along with generous government policies such as free university tuition. These factors have enabled them to accumulate more wealth than other generations can expect to in future. Second, the pandemic has been economically most costly for younger generations, in an effort to protect older generations who are more at risk from the virus. Third, looking ahead, we are likely to be entering another era of very low interest rates, which will tend to benefit those who already have assets at the expense of those who don’t. Fourth, any future tax rises on income will be paid primarily by younger generations. In this context a one-off wealth tax is fairer between generations than income tax rises alone."

 

[Salt Bailly]

agreed - what do we then consider a footballer who earns £150k per week...

Disgustingly wealthy.

 

[oates]

I agree it should be done during our generation, but the threshold is low in my opinion. There are people with wealth running into the multiple millions for 1, and there are companies that have made a killing during covid. The later part is really where they should be looking

@NotThatSoph and @oates I think we all agree that we need to pay taxes as someone needs to fill this black hole, and where these taxes actually go is more important.

As Cassidy mentioned is 500k of locked in assets too low? Or, as Soph suggests, I put myself into 200k mega debt on my house to go on a 30 day instant spending spree like Brewster?

I would propose a wealth tax on anyone with wealth. So lower the threshold to £200k. Why stick it at 500k? I know it hits me even harder but the government gets more tax and the country is better off for it.

Personally I wouldn't find it a terrible hardship but perhaps others might, what I feel should be addressed is obscene wealth at a higher rate. We don't need to punish the obscenely wealthy but they do have more capacity. What we should be able to say is that this country (the UK) provided the right circumstances for you to earn so much, this country is now going to require more from you as you have so much as not to miss another luxury home, yacht, supercar, divorce. Pay up and help out the people who got you where you are etc etc. Not bleed them dry, not make them want to leave the country, but if they do, freeze their assets and still collect before unfreezing them. Life has to be a bit fairer for everyone.

 

[Verminator]

Raising income tax would have more of a behavioural impact though, wouldn't it? It logically reduces incentive to work, whereas a one-off wealth tax doesn't have that sort of impact. I'm particularly unsure whether you want to raise income tax at a point where you'll be trying to get as many people as possible back to work after a period of record unemployment.

As for the logic in hitting pensioners more, the report argues that it is in fact fair:

"Those currently around retirement age have, as a group, benefitted from a period of strong house price growth, generous occupational pension provision, and healthy wage growth, along with generous government policies such as free university tuition. These factors have enabled them to accumulate more wealth than other generations can expect to in future. Second, the pandemic has been economically most costly for younger generations, in an effort to protect older generations who are more at risk from the virus. Third, looking ahead, we are likely to be entering another era of very low interest rates, which will tend to benefit those who already have assets at the expense of those who don’t. Fourth, any future tax rises on income will be paid primarily by younger generations. In this context a one-off wealth tax is fairer between generations than income tax rises alone."

Your first paragraph seems relatively naive, for an apparently intelligent person.
In what circumstances do you think that someone would choose to be unemployed, over getting back to work, purely for taxation purposes?

The second presumes that the majority benefitted from what you see as perks, which are only seen as such, because they have been denied later generations.
I will also add that the post war generation suffered great hardship and high taxation. Those who bought homes also had high interest rates to contend with.
They paid for the NHS to be built, and to clear the debts of WW2.
So, it is important to fairly judge pros and cons, rather than cherry pick out of jealousy.

As for low interest rates benefitting those with assets, you are well off the mark.
Those with debts benefit from that, not those who have paid in full, and definitely not those with savings being outstripped by inflation. These, being considered the "more fortunate" group.

Why should a person with relatively meagre income subsidise somebody who can afford multiple foreign holidays and cars that cost as much as a family home?

 

[Verminator]

Personally I wouldn't find it a terrible hardship but perhaps others might, what I feel should be addressed is obscene wealth at a higher rate. We don't need to punish the obscenely wealthy but they do have more capacity. What we should be able to say is that this country (the UK) provided the right circumstances for you to earn so much, this country is now going to require more from you as you have so much as not to miss another luxury home, yacht, supercar, divorce. Pay up and help out the people who got you where you are etc etc. Not bleed them dry, not make them want to leave the country, but if they do, freeze their assets and still collect before unfreezing them. Life has to be a bit fairer for everyone.

Well said.

 

[Grinner]

I will also add that the post war generation suffered great hardship and high taxation. Those who bought homes also had high interest rates to contend with.

I think this is too often forgotten these days. You can sympathise with the feelings of betrayal that they suffer from and why they think current generations have it easy. Not saying they are right, but I see where they are coming from.

 

[MikeUpNorth]

As for low interest rates benefitting those with assets, you are well off the mark.
Those with debts benefit from that, not those who have paid in full, and definitely not those with savings being outstripped by inflation. These, being considered the "more fortunate" group.

I'm afraid he is correct that loose monetary policy does push up asset prices (stocks, property) significantly. This is settled economic fact.

 

[NotThatSoph]

So hang on, if you have a million quid house you pay 1% (£10k) each year for 5 years or spread over 5 years i.e. £2k a year?

And that 1% applies just the same to billionaires as to people with an overvalued house? Or is there some sliding scale? Surely it has to be at least notionally graded doesn't it?

A flat 1 % above 500k over 5 years is just one example, they haven't actually made a specific suggestion.

 

[MikeUpNorth]

I think this is too often forgotten these days. You can sympathise with the feelings of betrayal that they suffer from and why they think current generations have it easy. Not saying they are right, but I see where they are coming from.

There's pros and cons to living in each generation, but on balance I would rather be a working age adult in 2021 than in 1970.

 

[Verminator]

I think this is too often forgotten these days. You can sympathise with the feelings of betrayal that they suffer from and why they think current generations have it easy. Not saying they are right, but I see where they are coming from.

Both of my parents grew up in 2 up 2 down houses. No bathrooms and an outdoor privy. Large families, 3 and 4 to a bed. They missed meals and slept in their clothes, in the winter.
We are a world away from what they had to contend with.

 

[Verminator]

I'm afraid he is correct that loose monetary policy does push up asset prices (stocks, property) significantly. This is settled economic fact.

But if it is your lifetime domicile, it's value is purely a number.

 

[Grinner]

There's pros and cons to living in each generation, but on balance I would rather be a working age adult in 2021 than in 1970.

What are you basing that choice on, out of interest?

 

[Sparky_Hughes]

And so it begins, turn everyone against each other while the elite continue to live like kings. Tory 101

 

[NotThatSoph]

@NotThatSoph and @oates I think we all agree that we need to pay taxes as someone needs to fill this black hole, and where these taxes actually go is more important.

As Cassidy mentioned is 500k of locked in assets too low? Or, as Soph suggests, I put myself into 200k mega debt on my house to go on a 30 day instant spending spree like Brewster?

I would propose a wealth tax on anyone with wealth. So lower the threshold to £200k. Why stick it at 500k? I know it hits me even harder but the government gets more tax and the country is better off for it.

200k wouldn't put you into mega debt, it would put you in a very comfortable situation with a mortgage at 50 % of your property value, something a lot of people can only dream of.

I guess it's just hard for the top 10 % to connect with the common man.

 

[oates]

Both of my parents grew up in 2 up 2 down houses. No bathrooms and an outdoor privy. Large families, 3 and 4 to a bed. They missed meals and slept in their clothes, in the winter.
We are a world away from what they had to contend with.

I grew up in those circumstances!

 

[sullydnl]

Your first paragraph seems relatively naive, for an apparently intelligent person.
In what circumstances do you think that someone would choose to be unemployed, over getting back to work, purely for taxation purposes?

The second presumes that the majority benefitted from what you see as perks, which are only seen as such, because they have been denied later generations.
I will also add that the post war generation suffered great hardship and high taxation. Those who bought homes also had high interest rates to contend with.
They paid for the NHS to be built, and to clear the debts of WW2.
So, it is important to fairly judge pros and cons, rather than cherry pick out of jealousy.

As for low interest rates benefitting those with assets, you are well off the mark.
Those with debts benefit from that, not those who have paid in full, and definitely not those with savings being outstripped by inflation. These, being considered the "more fortunate" group.

Why should a person with relatively meagre income subsidise somebody who can afford multiple foreign holidays and cars that cost as much as a family home?

As far as I'm aware the argument that an increase in income tax can reduce the incentive for people to return to work is pretty standard economic theory. You make it sound like it's something I've just made up.

As for me being "well off the mark" when I say interest rates will benefit those with assets, I'm not because I'm not suggesting that. The Wealth Tax Commission is. If you feel you're so well-versed in economics that you know better than an expert network of economists then well done you. I'm afraid I don't feel the same as I know exactly where I sit on this particular Dunning-Kruger curve, which is why I quoted them rather than giving my own opinion.

 

[Grinner]

I grew up in those circumstances!

Then you joined that pickpocket gang in London.

 

[oates]

Then you joined that pickpocket gang in London.

Not that far from the truth..

 

[MikeUpNorth]

What are you basing that choice on, out of interest?

That the standard of life for our generation is higher by virtually any measure compared to 1970.

We live longer.
We earn more.
There is less sexism and racism.
We have maternity leave rights.
We are less likely to die at work.
There is far less violent crime.
More of us go to university.
We can communicate instantly with anyone in the world at virtually no cost.
We have every book/film/music every made at our fingertips at virtually no cost.
We can travel cheaply and see the world (ok, not right now, but in normal times)
We can invest cheaply and freely in assets all over the world.
etc etc.

Yeah, I'm not going back to 1970 just because houses were a bit cheaper. In fact, more of us own our homes than in 1970:

Spoiler: Graph

 

[Verminator]

As far as I'm aware the argument that an increase in income tax can reduce the incentive for people to return to work is pretty standard economic theory. You make it sound like it's something I've just made up.

As for me being "well off the mark" when I say interest rates will benefit those with assets, I'm not because I'm not suggesting that. The Wealth Tax Commission is. If you feel you're so well-versed in economics that you know better than an expert network of economists then well done you. I'm afraid I don't feel the same as I know exactly where I sit on this particular Dunning-Kruger curve, which is why I quoted them rather than giving my own opinion.

Well done you for expertly avoiding appearing a pompous arse.

Whilst not in the group that ignores expert opinion, I would happily listen to an example of where being unemployed is preferable to being in work.
If it is plausible enough, I may even sell my tools.

 

[Grinner]

That the standard of life for our generation is higher by virtually any measure compared to 1970.

We live longer.
We earn more.
There is less sexism and racism.
We have maternity leave rights.
We are less likely to die at work.
There is far less violent crime.
More of us go to university.
We can communicate instantly with anyone in the world at virtually no cost.
We have every book/film/music every made at our fingertips at virtually no cost.
We can travel cheaply and see the world (ok, not right now, but in normal times)
We can invest cheaply and freely in assets all over the world.
etc etc.

Yeah, I'm not going back to 1970 just because houses were a bit cheaper. In fact, more of us own our homes than in 1970:

Spoiler: Graph

.

That all makes sense but I wonder if today's adults are happier. If you don't know what you are missing then you can't really lament. I think most oldies cherry-pick the good stuff from years gone by to justify why it was better. I think I got the best of it by being a young adult in the 80s and 90s. I'd hate to be starting out again now.

 

[MikeUpNorth]

Whilst not in the group that ignores expert opinion, I would happily listen to an example of where being unemployed is preferable to being in work.
If it is plausible enough, I may even sell my tools.

It's not about being employed vs unemployed, it's about the incentive to work more hours or seek higher-paying work. In summary, from the Congressional Budget Office:

How Do Marginal Tax Rates Affect Incentives to Work?
When deciding how much to work, people consider not only the higher earnings from working more hours but also the resulting difference in after-tax income—which is market income plus government transfers minus taxes. For example, increases in statutory tax rates have two opposing effects among people already working:

• The substitution effect, in which marginal tax rates increase. People tend to work fewer hours because other uses of their time become relatively more attractive, and
• The income effect, in which after-tax income drops from what people would have otherwise earned. People tend to work more hours because having less after-tax income requires additional work to maintain the same standard of living.

On balance, the first effect appears to be greater than the second, according to CBO’s assessment of relevant research. Increases in marginal tax rates, on net, decrease the supply of labor by causing people already in the labor force to work less.

The effects on labor supply are not uniform, however. Groups of workers respond differently to changes in taxes and transfers. For example, married women have historically worked less when marginal tax rates rose than have working-age men, on average.

Some changes in government benefits can generate both substitution and income effects that push labor supply in the same direction. As income rises, phasing out a benefit (such as SNAP) increases the marginal tax rate and reduces the incentive to work. SNAP also effectively increases the after-tax income of its recipients—even as the benefit phases out—further discouraging work.

You can read the full report here, if you want: https://www.cbo.gov/sites/default/f...012/reports/43674-laborsupplyfiscalpolicy.pdf

 

[MikeUpNorth]

That all makes sense but I wonder if today's adults are happier. If you don't know what you are missing then you can't really lament. I think most oldies cherry-pick the good stuff from years gone by to justify why it was better. I think I got the best of it by being a young adult in the 80s and 90s. I'd hate to be starting out again now.

I suspect hedonic adaptation means humans' overall happiness doesn't change much regardless of our conditions over time (with the exception of disasters like wars, famine etc)

 

[Verminator]

That all makes sense but I wonder if today's adults are happier. If you don't know what you are missing then you can't really lament. I think most oldies cherry-pick the good stuff from years gone by to justify why it was better. I think I got the best of it by being a young adult in the 80s and 90s. I'd hate to be starting out again now.

Same generation as you, maybe older, and apart from AIDS and the cold War, the 80's and then the 90's seem just about right for standard of living and optimism.
It was a good time to buy an annuity as well. 3 times what's on offer now.

Like any financial game, somebody always comes along and wrings it until bone dry.
That is why people switch to 2nd properties as investment in the first place. Unfortunately, I could just about afford one.

 

[Wumminator]

No, not extremely

Course you are. You’d be in the top 0.2% I imagine

 

[RedC]

Why the feck should an average person like me. Who bought a property in is early twenties, rented it out and continued to live at home to fund it. So they have a retirement fund 50 years down the line, be "Taxed to death" so other people that can't be arsed working hard get to go on holiday? Absolutely bonkers.

People with more than one property, usually aren't rich.

I'm not sure which part of this post is stupider, blaming it all on 'spongers', or the fact that you bought a house, yet continued to live with your parents

 

[Grinner]

Same generation as you, maybe older, and apart from AIDS and the cold War, the 80's and then the 90's seem just about right for standard of living and optimism.
It was a good time to buy an annuity as well. 3 times what's on offer now.

Like any financial game, somebody always comes along and wrings it until bone dry.
That is why people switch to 2nd properties as investment in the first place. Unfortunately, I could just about afford one.

well yeah the constant fear of nuclear oblivion did loom a bit large. I was on a YTS job for a while too which was pretty grim.