Wealth taxes are a bad idea that never dies. Should the UK government introduce them, as a new report from the Wealth Tax Commission is urging, it would be swimming against a tide of European nations that have learnt the hard way how punitive taxes on the rich can be counterproductive and encourage avoidance, evasion and capital flight. The vast majority of countries which have introduced a wealth tax have later abolished it.
Perhaps we cannot be altogether surprised that a Wealth Tax Commission has come to the conclusion that we need a wealth tax. Many of the risks associated with wealth taxes, the authors suggest, would be mitigated by the fact that this would be a “one-off” rather than an “annual” levy, and would be far more wide-ranging than the failed continental experiments, themselves riddled with exemptions.
This last point is important: the Wealth Tax Commission is proposing a 1 per cent tax on the net wealth of individuals over £500,000, including property and pension pots. We are not just talking about cash in the bank, but people’s homes, their worldly possessions, their retirement savings. It isn’t soaking the super-rich (though let’s not forget the top 1 per cent pay nearly 30 per cent of income tax) – it is a measure that would affect one in six adults.