Britain's Tax Con

Lambert seems to be proposing that wealth transfers to others, mostly family should be taxed more, inheritance, gifts, businesses. The current regulations do make it easy to transfer a great deal over the years, targeting that could raise a great deal of revenue

The start of his argument cetainly catches our interest. "If everyone in the country understood how the tax code worked, it wouldn't last for very long."

It's late at night and so I've only listened to the first 5 minutes or so. My first comment is that he's going over old ground. You only have to read the comments from GNers whenever taxation, particularly of assets, is mentioned on here. Occasionally someone will write that they are not worried about IHT but most people complain that they don't want the benefit of their hard earnings to be taxed. They are particularly vehement about inheritance tax. "I want to pass things on to my children" etc etc.

About 20 years ago I had a letter published in the Daily Express in response to people complaining about IHT.
I suggested that they downsized and bought themselves something easier to manage than their large family home and they could then hand some money over to their family or maybe start a fund for their GCs education. There were a few replies printed in the paper accusing me of telling people what to do.

You can talk until you are blue in the face about how the value of peoples' homes have increased with inflation, rather than their hard work. I have mentioned several times on here about our London house. This was bought in 1979 for £18.5k. We spent about £10k over 7 years on renovations, most of which were carried out by my DH. We sold in it in 1986 for £85k. The last time I looked on line it was worth around £1.25 to £1.5 million. A surplus of well over £1million which would have been achieved without us doing anything further other than occasional maintenance and redecoration..

As it happens we moved to Suffolk and bought a lovely cottage with the proceeds of the London house. It increased in value but not to the extent of the former.

Although there is no longer tax relief for mortgage interest on a loan for the purchase of one's main residence, there are ways around this although probably not as many as there were 40 odd years ago when I saw this in action.

I would agree that Capital Gains tax should be reviewed. I've just completed a tax return for a client who purchased 2 artworks some years ago and the Capital Gain was just over £10k which is exempt. Another client has made gains of £43k during the last tax year and the CGT is around £5000. That is a rate of 11.6%. I would suggest that gains are taxed as employment income.

I think that profit on house prices should be taxed, and the money used to build social housing. That would help young people and may stop some of the resentment towards older people. I think it would be a better system than stamp duty.

It's difficult to be fair though - I suggested this once on here, and people pointed out that they have made improvements since buying, which is a valid point. Perhaps people should have to have their house valued before doing works that cost more than £X and again after, so the percentage can be worked into a formula for when it is sold? I don't know - it's just an idea, but geographical discrepancies in profits skew the market and prevents mobility for many.

I don't know whether the tax should apply on the sale of a house or when it forms part of an estate. That would have to be thought through by people cleverer than I am, as interfering in the housing market has huge ramifications on people's lives, and the implications aren't always clear cut.

I read Lambert's piece when it was first published. I think he is correct about the accumulation of wealth.
He seems to have forgotten about the first episode of QE in 2008. Some time later, I think after Piketty's book was published, there was a Panorama programme about the effect of the 2008 QE. in channelling money to the already wealthy. And its failure to do what it was supposed to do, i.e encourage more business investment in the economy. Instead the money was used to inflate high end asset prices, such as gilts and property. It would actually have been more effective to have given everyone a few £k because then it would have been spent into the everyday domestic economy. The effect has been much the same in subsequent rounds of QE.

Lambert has some suggestions for taxing wealth. Richard Murphy has been working on this and is publishing his proposals regularly. The essential part of them is that they don't propose new taxes (new taxes being what Reeves has ruled out), they work on adjusting current taxes to make them more equitable.

Heterodox economist Steve Keen points out that international data shows that economic growth has slowed in countries whic abandoned Keynesianism in the 70s in favour of the neoliberal monetarist economic theory which now prevails.

profstevekeen.substack.com/p/the-failure-of-neoliberalism?utm_source=substack&utm_medium=email

It's a long read but no longer than Lambert's piece.

Incidentally, Ian Dunt makes the same point as Keen about the failure of neoliberal economics in the UK in his book 'How to be a Liberal'. Even non economists can put two and two together to make four...

Whatever you earn, just spend it or some one else will.

Dinahmo

It's late at night and so I've only listened to the first 5 minutes or so. My first comment is that he's going over old ground. You only have to read the comments from GNers whenever taxation, particularly of assets, is mentioned on here. Occasionally someone will write that they are not worried about IHT but most people complain that they don't want the benefit of their hard earnings to be taxed. They are particularly vehement about inheritance tax. "I want to pass things on to my children" etc etc.

About 20 years ago I had a letter published in the Daily Express in response to people complaining about IHT.
I suggested that they downsized and bought themselves something easier to manage than their large family home and they could then hand some money over to their family or maybe start a fund for their GCs education. There were a few replies printed in the paper accusing me of telling people what to do.

You can talk until you are blue in the face about how the value of peoples' homes have increased with inflation, rather than their hard work. I have mentioned several times on here about our London house. This was bought in 1979 for £18.5k. We spent about £10k over 7 years on renovations, most of which were carried out by my DH. We sold in it in 1986 for £85k. The last time I looked on line it was worth around £1.25 to £1.5 million. A surplus of well over £1million which would have been achieved without us doing anything further other than occasional maintenance and redecoration..

As it happens we moved to Suffolk and bought a lovely cottage with the proceeds of the London house. It increased in value but not to the extent of the former.

Although there is no longer tax relief for mortgage interest on a loan for the purchase of one's main residence, there are ways around this although probably not as many as there were 40 odd years ago when I saw this in action.

I would agree that Capital Gains tax should be reviewed. I've just completed a tax return for a client who purchased 2 artworks some years ago and the Capital Gain was just over £10k which is exempt. Another client has made gains of £43k during the last tax year and the CGT is around £5000. That is a rate of 11.6%. I would suggest that gains are taxed as employment income.

Many people buy gold and diamond jewellery. Some will have family heirlooms, tucked away, some may buy one really good piece of art. All will rise in value. Shall we then tax people on these pieces when they sell them. A friend of mine sold some family jewellery recently, was paid £2000. DgS sold his car 4000, shall we tax them on that too.
We have millions sitting on benefits, some not able to work, most can , get off your asses and find work. More tax payed.
No the politics of envy , work hard, buy something, it rises in value, no fault of yours. Let the state take it off you, because its not fair that others haven't been able do the same. This of course is a tax on the hard workers and the baby boomers.

You've missed the point Freya. It's not a tax on working hard. Asset accumulation doesn't require hard work.

Assets can go down as well as up.

If taxation doesn’t fund government spending why the constant cries to tax the rich more, tax people’s homes…

Incentivise people to work, to attain their goals, to improve their lifestyles and have money in the bank oops then the state will tax you more for being successful.

Thanks for the "long read" Maisie. They are what bring me back to GN when I feel driven away by the headline readers and "entitled to my opinion" interlocutors.

I will enjoy the read (have to take the car for its MOT first ) whether or not I agree with it all. More knowledge can only help.

I can hear the question coming from the article and the conversation on the podcast and it both interests and worries me. Keynesian economics is and always was the economics of the centre and those close to the centre.

My worry, listening and reading, is that the Neo-Liberals, acting as the Whigs of today, have moved us so extremely far into laissez-faire economics. Will the Newton's Cradle counter effect push the extremes of Labour to take control and form a post WWII France's "dirigisme" style take over?

We already hear, on GN, talk of a "directed" economy in some areas. I wonder, while I read and listen, if that is what these very knowledgeable people are expounding.

growstuff

You've missed the point Freya. It's not a tax on working hard. Asset accumulation doesn't require hard work.

You'll be first in line to hand your assets over then. No I haven't missed the point. We all, working anyway, pay taxes directly, others indirectly through vat , I am still paying tax, because I had the temerity to pay into an occupational pension.
Agree with GrannyGravy13 on this.

Doodledog

I think that profit on house prices should be taxed, and the money used to build social housing. That would help young people and may stop some of the resentment towards older people. I think it would be a better system than stamp duty.

It's difficult to be fair though - I suggested this once on here, and people pointed out that they have made improvements since buying, which is a valid point. Perhaps people should have to have their house valued before doing works that cost more than £X and again after, so the percentage can be worked into a formula for when it is sold? I don't know - it's just an idea, but geographical discrepancies in profits skew the market and prevents mobility for many.

I don't know whether the tax should apply on the sale of a house or when it forms part of an estate. That would have to be thought through by people cleverer than I am, as interfering in the housing market has huge ramifications on people's lives, and the implications aren't always clear cut.

As with any tangible assets subject to capital gains you are allowed to add the cost of improvements (and there are strict definitions as to what constitutes an improvement) to the base cost of the house.

Freya5

growstuff

You've missed the point Freya. It's not a tax on working hard. Asset accumulation doesn't require hard work.

You'll be first in line to hand your assets over then. No I haven't missed the point. We all, working anyway, pay taxes directly, others indirectly through vat , I am still paying tax, because I had the temerity to pay into an occupational pension.
Agree with GrannyGravy13 on this.

It really doesn't matter whether it requires "hard work" or not. This is such a redundant arguement and very much part of the culture wars, designed to make each side feel superior.

Income is income however you aquire it. It should all be taxed as one income, under the same code with no opt outs of tax due. That would either increase the tax take or reduce the rate, or some of each.

That would cause investments in business to fall and cause even more private landlords to sell up. Lots of resultant casualties.

If taxation doesn’t fund government spending why the constant cries to tax the rich more, tax people’s homes…

First of all, the incontrovertible fact is that governments with a sovereign currency, of which they are the sole issuers, do not need to tax before they can spend because they can create the money that they spend.

They cannot go on creating money ad lib because that would cause rampant inflation, extreme examples being the Wiemar Republic and Zimbabwe. So they need to take back at least sufficient of the money they have created to make 'space' for their continual cycle of money creation and spending. The mechanism for that is taxation.

From this point there are two ways of looking at taxation. MMT theory says that it just destroys the created money. Or, you can say that the reclaimed money is revenue which will 'balance' (though not in a accounting sense) the initial government outlay. 'It pays off the overdraft' if you like...

But either way you care to look at it, the money creation comes first.

Of course, the whole amount issued never entirely comes back immediately via taxation because people save some of their money. If they don't spend it, they aren't taxed on it. But if they 'save' by investing in government bonds, or in government savings vehicles, such as Premium bonds, savings bonds or National Savings accounts their money returns to the government via these instruments. Government pays interest on these 'savings', so it's not a cost free method of raising revenue, but the sum of the interest paid is only a small percentage (until lately, less than 5%) of the money that these savings make available to the government.

Spending comes before taxation and the more that government spends the more it will get back via taxation. It is noticeable that when a government cuts back on its spending it 'borrows more.

Incentivise people to work, to attain their goals, to improve their lifestyles and have money in the bank oops then the state will tax you more for being successful.

It would require quite an essay to address these points, but I will point out that a great many 'poor' people work very hard, sometimes with more than one low paid job, and see no return at all for their hard work. Not everyone can be an entrepreneur...

The investments are not in business though GSM. They are, most often, investing in investment vehicles. I would and do have more sympathy with those directly investing in making and growing a business.

If landlords sell en masse, house prices would come down and more people would be able to have homes. It is more an exchange of casualties than an increase.

Germanshepherdsmum

That would cause investments in business to fall and cause even more private landlords to sell up. Lots of resultant casualties.

I suspect that an examination of historical higher rates of taxation since WW2 would find that there is no evidence for your assertion.

MaizieD of course everyone will not become an entrepreneur, but entrepreneurs employ people.

Not all employers are bad, some more than others need encouragement to pay their employees well along with providing good working conditions.

More tax will not be an incentive.

Even Sir Starmer and Angela Rayner have publicly stated that U.K. citizens are currently over taxed

MaizieD of course everyone will not become an entrepreneur, but entrepreneurs employ people.

It's a symbiotic relationship, GG13. The entrepreneurs would be nothing without the people working for them.

Anyway, this is not about people like you, it is about reworking a tax system which 'rewards' the wealthy simply for being wealthy. Not all that 'wealth' has been acquired by dazzling entrepreurship, much of it is inherited or gained by speculation in the financial markets. As I said, there's an essay to be written on this but I'm not doing it this morning...

“If landlords sell en masse, house prices would come down and more people would be able to have homes. It is more an exchange of casualties than an increase.”

If owning property in general were to become less attractive and its value falls, banks loose the collateral value also lower income and capital value could easily mean less tax would be collected.

I would not expect a sensible chancellor to risk a fall in prices, there is plenty of scope to tighter the wealth transfer rules. It’s easy for wealth to be transferred, using gifts, inheritance and business transfers without any tax at all, Lambert estimates that only 5% of wealth transfers are taxed at all

If you are going to tell us what "Sir Starmer" as you choose to call him, commented, could we please have a quote GrannyGravy? Making it up is very unhelpful.

At the heart of this article it says, By raising taxes on wealth, Labour could, crucially, cut taxes on income. It is more about a redistribution of tax, a possible lowering of income tax.

This is the point being made.

One part of the country has lived through an asset boom. The other is living on wages that have not risen in real terms for 15 years, since before the 2008 financial crash. For those with assets, the crash is a distant memory. London house prices have risen inexorably since 2010, by 31 per cent after inflation. The FTSE 100 is 58 per cent higher after dividends. Real average weekly pay is, meanwhile, no higher today than in July 2006. Those who live in Asset Britain have no idea what Austerity Britain is like.

Did anyone bother to read or watch be foe coming up with their closed mind view? My apologies as I know some did, but old age atrophy seems to have shut any new thinking or the opening of their mknds for others.

be foe before
mknds minds