This is the view of the guardian - I thought it worth a discussion.
Taxing the rich: essential for economic fairness and growth
Powerful vested interests are trying to stop the wealthy from paying their fair share.
Denis Healey is often misquoted as saying he wanted to “squeeze the rich until the pips squeak” in the 1970s. He never actually used that phrase. What Labour’s finance spokesman did predict, however, was that his proposed top tax rate would spark “howls of anguish from the 80,000 people” wealthy enough to pay. With Labour in power again, it seems plus ça change, plus c’est la même chose. On Thursday this newspaper reported that Rachel Reeves, Healey’s successor in the Treasury, was looking at taxing the rich more by increasing capital gains tax. That would be a very good idea. Yet “howls of anguish” fill the airwaves and can be found on newspaper front pages. Ms Reeves should ignore them.
For decades the rich have projected ideas that support their interests, notably by reframing political language to valorise “wealth creators”. Post the financial crisis, this has been a harder sell. But plutocrats won’t easily give up their muscle, privileges and wealth. In Britain, the grossly unfair distribution of power fuels the effort to protect 3,000 individuals in private equity from Labour’s plan to make them pay their fair share in tax. It’s absurd to think that successful capitalists require an annual state subsidy of £188,000 just to perform their roles. However, this is probably only the beginning of Labour’s efforts. On paper, Britain’s tax system seems relatively progressive, with a headline rate of 47% for those earning over £3m. In reality, nearly a quarter of this ultra-wealthy group pays less than 12% in taxes.
The true scale of income inequality in the UK has been obscured by the methods the wealthy use to generate income. Current measurements exclude the capital gains from selling or shutting down businesses – one of the primary ways the rich earn money and benefit from lower tax rates. A 2020 study found that the top 1%’s share of total income had stayed steady at 14% since 1997. However, when capital gains were included, that figure rose to 17%, with the bulk of the increase concentrated among the ultra-wealthy.
Ms Reeves should act to make Britain more productive. This week, the Institute for Fiscal Studies highlighted how the current tax system discourages investment, undermines productivity, and ultimately makes the country poorer. To reform capital gains tax the chancellor should look at the work of researchers from the Centre for Analysis of Taxation (CenTax). Their latest paper provides a blueprint for necessary reforms. It proposes aligning capital gains tax rates with income tax rates, introducing allowances to incentivise productive investment, taxing the increase in an asset’s value when it is inherited, and implementing an exit tax (common in major economies) to prevent individuals from dodging British taxes on gains made while residing in the UK. In total the package would raise £14bn.
Capital gains tax has morphed into a driver of inequality. The top 5,000 taxpayers account for over half of the taxable gains, receiving an average of nearly £7m each. In fact, the benefits per capita are four times higher in London compared with poorer UK regions. Creating a low-poverty, low-inequality society requires, as the Beveridge report declared in 1942, much more than “patching”. But powerful vested interests are pushing to make opposition to taxing the rich a key element of UK economic policy. Ms Reeves must remain committed to building a fairer and more productive economy, and taxing the rich is essential to achieving that goal.
There seems to be a view that if you're not actually poor you're 'super rich' and should be soaked for every penny. Most of us are in the middle. As usual we'll be squeezed. 
Wyllow3
People always trot out this "politics of envy" trope when it's about taxing the very rich. I see no basis for it, it's a necessity trying to raise money from those who can afford it for society as a whole. Those who have made money from a lifetime of others working for them and making a profit can afford to give away a little more (in their terms) for those who did that work.
The super rich will relocate
It will be the middle ground SME owners who will be squeezed once again.
The employers who look after their staff, the businesses which are the so called backbone of the UK
Don’t be surprised when they start winding down, not replacing staff and then closing…
I don’t see any evidence that SME companies will be hit.
It is the most wealthy top 1% we are talking about. None of them come into that category.
Not all the top 1% are preparing to leave the country - I suspect that the majority have a degree of altruism, that understands the level of poverty in the U.K. and that it must be addressed, together with the need to have fully functioning public services.
Indeed we know that there is quite a lot of philanthropic activity amongst the very wealthy.
The lack of investment has plagued this country since the Tory's failed austerity measures. No one wants to invest in a country on its knees.
No-one wants to invest because they see little prospect of it being profitable. A country on its knees is a country with not enough people with enough money to buy the goods and services the 'investors' will make a profit from.
The only way the UK is really going to attract investors is to invest heavily itself. Not only in infrastructure but also in restoring the public sector services which have deteriorated over years of tory 'austerity'. State investment will create a demand for private sector goods and services (because the state makes nothing for itself) which, in itself, will create jobs and lead to growth. As will restoring public sector pay when people spend their extra money into the domestic economy.
The state can do this without 'borrowing' because we have a sovereign currency and can create any amount of it we like so long as there are resources available for purchase. We cannot deny that we are currently short of resources to purchase...
This is very much what Biden has done in the US with the result that the US economy is in very good shape.
We have to realise that the money the state puts into the economy will mostly return to it via taxation as most financial transactions are subject to taxation. Not all of it returns as people with sufficient money have a tendency to save some of it, and, of course, a fair number of international companies which receive our money, such as Amazon, work it so they don't pay UK taxes on the money that is spent with them. So that is lost for ever.
In the matter of taxation of the wealthy, it is reckoned that the top 1% of wealth holders in the UK have an effective tax rate of 22%. Contrast this with the lower percentiles which have an effective tax rate of well over 30%.
This long and slightly complex read explains this:
www.taxresearch.org.uk/Blog/2024/10/12/are-the-rich-going-to-leave/
One of the solutions I'd favour, rather than trying to prise their gains from the wealthy, is to take measures to prevent them gaining so much in the first place...😁
I think thats a worthwhile reminder WWM against the assumption that seems to be made that the super rich are also all selfish and about to flee.
keepingquiet
Thankyou for this interesting and intelligent post. I can't respond to all the points but I will say I agree.
As a taxpayer all my life working in the public sector I expected to have a more comfortable retirement than the one I finished up with. Yet, I know I am relatively comfortable compared to some.
I have always been taxed at source, so never had a chance to declare and not, I just paid without thinking like the vast majority of working people. I wasn't given a chance to fiddle, feeling my taxes were helping to keep the state in working order which is what effective taxation should be.
My hope is that Reeves turns out to be a great chancellor- my fear is that the establishment (so much more powerful than the non-existent government opposition) will do everything in its power to keep its own vested interests as it has always done.
Avoiding capital gains is part of that vested interest.
I think she should act now and act quickly if she is to achieve any success at redressing the terrible imbalances built into our system of privilege and power. So yes, I totally agree with your final sentence.
I agree
I don’t ‘trot’ and I have a mind of my own.
Grantanow
I noticed Mullins didn't say how much profit he had made out of his business after paying tax.
Exactly Grantanow, I bet it would at least match the amount he paid in tax & who really needs that much?
I don't believe the Tory press who predict gloom at any increase in taxes, there is a group of billionaires who want to pay more tax.
www.bbc.co.uk/news/business-60053919#:~:text=A%20group%20of%20more%20than%20100%20of%20the,the%20global%20economic%20recovery%20from%20the%20coronavirus%20pandemic.
Sorry nanna should have given more context to my remarks.
I do rather strongly react to the idea that working towards a more equitable society is based on a negative human emotion
(((Its been discussed in the past on a GN thread (I think around the election)
The phrase "Politics of Envy" comes from a much discussed book of that title (and other origins).
It's a right wing theory based on the idea that all demands for more social equality derive from envy (as in a deadly sin)
not valid political aspirations for that social equality)))
I’m currently in the US touring and visiting relatives, at present in a very prosperous leafy part of North Carolina. The economy is very different to the UK. Successive governments have taken the UK in a different direction so we are all poorer.
They are exploiting far more of their own resources, manufacturing is far more important, they have spent very little on climate change, coal is a major energy source. They import far less than the UK, the tech companies bring in very large income streams from overseas.
The poor are much worse off, basic services are very limited, those with money buy health insurance at whatever level they can afford. Food is much more expensive even fast food costs around double the UK price
Migration is obviously a hot topic, but the economy absorbs them all, despite Republican diatribe the economy would soon be in trouble if migration stopped.
So I like the US but wouldn’t choose to live here.
The US economy has thrived on migrant labour.
Of course, saying that the wealthy'make money' is a complete misnomer. The only entity that can 'make money' is the state. It 'makes' it by state spending and by creating more if needed. The fact that there is money available to match the needs of an expanding population is because the state have created more to match the demand for it.
The wealthy just extract more of the state created money, by way of favourable tax regimes, favourable financial regulation, and excessive profits, than anyone else does.
GrannyGravy you are right once again. The super rich will move abroad, or move their money abroad. It is those in the middle who will do the paying. My son is a lawyer. He has done well and he would be considered wealthy by many on here, although many on here sound quite wealthy to me. Anyway, my son pays an eye watering amount of tax. He doesn’t complain or try to avoid paying his taxes, but to me, the amount is eye watering. He pays enough in my opinion. Anymore would be unjust because he already pays so much. He is not super rich. He works very long hours. He could just stop doing as much work if he wanted to pay less tax, and then the government wouldn’t benefit. At the moment he’s not doing that. Those in the middle will be doing the paying, and if they wind down their businesses, or stop working so much, no one will benefit.
We know that trickle down is a fallacy.
It is not the politics of envy but of fairness, justice and humanity.
The rich do not need the vast sums they earn - they just want them to sustain an unnecessarily spendthrift lifestyle. There needs to be some balance, but getting the richest amongst us to look seriously at that has always been a challenge.
Grantanow
I noticed Mullins didn't say how much profit he had made out of his business after paying tax.
Whatever profit he has made he has worked hard for. He has also kept countless smaller companies in business by buying tools, vans, workwear etc. He has kept hundreds if not thousands of people in work.
I am sure if you are that desperate you could look at his accounts on line.
Remember, it’s a business not a charity and the whole point of running a successful business is to make a profit and the bigger the better.
“Britain returned to growth in August, registering 0.2pc GDP expansion. And on Monday, the Chancellor and Prime Minister Keir Starmer are welcoming several hundred international investors to an investment summit in London, in an attempt to assert that, under Labour, the economy has turned a corner.
But our growth outlook depends less on what happens here, and what the Chancellor’s Budget contains, than it does on the resolution or otherwise of this deeply alarming stand-off between Israel and Iran.”
Source: Liam Halligan in the Telegraph today.
Lisaangel10
ronib
The richest people in the Uk are highly mobile and have the ability to jump ship if financial advantages are removed. Is Spain the country of first choice?
Pretty sure I heard yesterday that 4,500 millionaires have already left the country. Many of these are self made millionaires.
I know Charlie Mullins has gone to his other home in Spain. He was on TV the other day saying he has paid over £22.5 million in taxes over the years and he is not paying any more.
Many of these have provided jobs for hundreds of people and offered training schemes and supported new initiatives.
Please see my comments/explanations on the subject of Mulllins on page 4 of the thread on enployees'/ers' rights.
He may have paid £22m in tax but he has earned substantially more than that. Also, it is his employees who earned that money for him. Obviously he had the original idea and took the risks but hundreds of plumbers have worked for his company over the years and were responsible for creating his wealth.
No entrepreneur would be in their current wealthy position if it wasn't for their workers.
Grantanow
I noticed Mullins didn't say how much profit he had made out of his business after paying tax.
Here's a link to the last accounts filed for his period of ownership. Scroll down to 5/10/2021 and look at the pdf. It's not difficult to understand.
find-and-update.company-information.service.gov.uk/company/02012715/filing-history
Luckygirl3
We know that trickle down is a fallacy.
It is not the politics of envy but of fairness, justice and humanity.
The rich do not need the vast sums they earn - they just want them to sustain an unnecessarily spendthrift lifestyle. There needs to be some balance, but getting the richest amongst us to look seriously at that has always been a challenge.
Every time the rich spend their money on booze, clothes, watches, cars, yachts etc these items are taxed, during production and on end user purchase point.
Money makes the world go round, always has, always will.
Aveline
Many businesses are not big. Small businesses are the backbone of the country. People keep them going as they feel responsible for their employees. What happens when owners retire? They hope to sell the business and live on what that raises but now if capital gains tax shoots up that's hitting them hard? Why should anyone large or small invest in UK if it just not worth their while?
Absolutely agree! The tax loophole that RR intends to keep in place for Shein, an appalling company that has a complete disregard for ethical practices is highly questionable, bleating on about individual evasion but allowing a perpetuation of this glaring unfairness is just morally wrong. There is no multi- lateral consensus to collect the appropriate amount of tax from the likes of Amazon and the big tech companies. It's pretty understandable the Charlie Mullins of this world will jump ship, it's happened before under previous Labour administrations, the super rich will always have that ability and whatever you think of him, his tax contributions have been considerable, not to mention job creation. Even if he gets to keep an enormous amount of profit that possibly he doesn't need, as indeed most wealth creators do. On the question of need, did our PM considering his personal wealth need to have clothes and specs bought out of a donor's pocket instead of his own, he, and politicians like him across the spectrum are hardly great examples of what constitutes an equitable society which is why there is a general loathing of them by the public.
nanna8
Many of the super rich employ a lot of people. False economy to force them overseas to my mind. Politics of envy ?
No. I think most of us who aren't that rich realise that we do not have the abilities/work ethic/ desire etc etc to achieve such wealth.
If entrepreneurs, business owners and wealthy individuals didn’t employ people the dole queues would grow daily.
As long as the employees are paid appropriately for their work and treated fairly what is the problem?
maddyfour
GrannyGravy you are right once again. The super rich will move abroad, or move their money abroad. It is those in the middle who will do the paying. My son is a lawyer. He has done well and he would be considered wealthy by many on here, although many on here sound quite wealthy to me. Anyway, my son pays an eye watering amount of tax. He doesn’t complain or try to avoid paying his taxes, but to me, the amount is eye watering. He pays enough in my opinion. Anymore would be unjust because he already pays so much. He is not super rich. He works very long hours. He could just stop doing as much work if he wanted to pay less tax, and then the government wouldn’t benefit. At the moment he’s not doing that. Those in the middle will be doing the paying, and if they wind down their businesses, or stop working so much, no one will benefit.
So, they can't tax the super rich as they will move abroad. And they can't tax the lower income and the poor, well for obvious reasons.
And yes, we, my children who have been very successful, have done very well but are not super-rich, will end up being the ones who pay- and yes, that is not fair.
So what do you suggest Labour do- as they have inherited a diabolical situation from the ones who were supposed to be the experts but chose to suck the country dry, for their own benefit, mostly.
Aveline
Many businesses are not big. Small businesses are the backbone of the country. People keep them going as they feel responsible for their employees. What happens when owners retire? They hope to sell the business and live on what that raises but now if capital gains tax shoots up that's hitting them hard? Why should anyone large or small invest in UK if it just not worth their while?
Many businesses depend upon goodwill. The owners will have built up a good relationship with their customers etc etc. Often, when a business is sold the new owners do not have that relationship with their customers. They may be able to built upon it but often don't or can't.
Wyllow3
People always trot out this "politics of envy" trope when it's about taxing the very rich. I see no basis for it, it's a necessity trying to raise money from those who can afford it for society as a whole. Those who have made money from a lifetime of others working for them and making a profit can afford to give away a little more (in their terms) for those who did that work.
Exactly
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