In an Independent “exclusive“, Ed Balls has said he’s going to impose a “proper wealth tax”. Wealth taxes are window-lickingly stupid and anyone advocating them is an economically illiterate moron. here’s why:
Moral hazard. It penalises those who save for retirement, pay off a mortgage and seek to not be a burden on the state, against those who spent their surplus income on Beer and Cocaine.
As Tim Worstall points out, a well-off retiree might face a wealth-tax greater than their annual income.
Real wealth is very mobile. No-one is going to stick around or let their money stick around to be taxed by the government. The left hand side of the laffer-curve on wealth taxes is very short. For this reason, the super-mobile top 1%, who pay 25% of income taxes will leave for Switzerland, Monaco or the Carribean. You end up therefore not taxing the 1%, but the less-mobile upper-middle income retirees instead. Even here, a wealth-tax increases the attractiveness of the Costa-del-sol, where retirement property is currently cheep, like a budgie. The wealth tax may, and probably will, therefore end up costing the exchequer.
For the reasons laid out above and many more, wealth taxes are very hard to collect. Dennis Healy, former Labour chancellor of the exchequer during the ‘winter of discontent’, no rich-pandering neo-something he, said in his memoirs “in five years I found it impossible to draft one which would yield enough revenue to be worth the administrative cost and the political hassle“
Though to be fair, that the hapless Healy thought something impossible does mean it actually is.
Wealth taxes are so utterly stupid that even Gordon Brown’s lickspittle, Ed Balls is not actually proposing one. He appears to be entering negotiations with the Liberal Democrats by suggesting a mansion tax instead. He’s just appeasing his own moron supporters by calling it a wealth-tax. I’ve no problem with a mansion tax, but it would be best imposed putting a few more council tax bands on at the top, rather than designing another silly, gimmicky tax with its own bureaucracy of Labour-voting trades unionists. However increasing council tax, even on the rich is political suicide because of the Daily Mail.