The Tax System Rewards Owning And Punishes Working

Fifteen left thinkers spent the summer assembling seventy policy options for the chancellor's first budget, and Caitlin Boswell of Tax Justice UK put the argument into a single clause. A government serious about material improvement, the report says, "must be prepared to address one of the structural causes of inequality: a tax system that favours wealth over work". Notice what that is not. It is not that the old have stolen from the young. It is that owning is taxed at one rate and working at another, and the gap is where rent is collected.

The numbers are specific enough to argue with. A wealth tax on net assets above £10m would raise about £24bn a year. Equalising capital gains tax with income tax would raise a further £11.3bn — enough, the report says, "to fund the building of 90,000 new social homes". Council tax and stamp duty, called "regressive, outdated and unfair", would give way to a proportional property tax under which 23 per cent of households pay more. The Institute for Fiscal Studies thinks that would lower revenue and drive money abroad, and the objection is printed alongside.

The rentier is not a generation. It is a rate of tax, and rates are written down by people whose names we know.

The scale is not in doubt even where the remedy is. On Gabriel Zucman's figures the top two hundred families in Britain owned the equivalent of about 5 per cent of national income in 1989 and about 22 per cent now. While 99 per cent of people pay 40 to 50 per cent of their incomes in tax, billionaires pay a rate equating to 25 per cent at most. The answer proposed is deliberately unclever: 2 per cent above $100m in assets, no exemptions, no waiting for the OECD.

Where this reading does touch the retired, it touches the house and not the person. Free personal social care would be paid for by a 1 per cent income tax surcharge on the over-forties and by a charge secured against the property, recovered after sale or death — which, as the IPPR's Sebastian Rees puts it, would "allow housing wealth to contribute to the cost of reform without requiring people to sell their home when they first need care". That is the difference between taxing a pensioner and taxing an asset.

Fifteen left thinkers spent the summer assembling seventy policy options for the chancellor's first budget, and Caitlin Boswell of Tax Justice UK put the whole argument into a single clause. A government serious about material improvement, the report says, "must be prepared to address one of the structural causes of inequality: a tax system that favours wealth over work". That is the charge, and it is worth noticing what it is not. It is not that the old have stolen from the young. It is that owning is taxed at one rate and working at another, that the gap between them is where rent is collected, and that a schedule of rates is a thing a government writes rather than a thing that happens to it.

The numbers attached to it are specific enough to argue with, which is the point of publishing them. A wealth tax on net assets above £10m would raise about £24bn a year. Equalising capital gains tax with income tax would raise a further £11.3bn — enough, the report says, "to fund the building of 90,000 new social homes". Council tax and stamp duty, called "regressive, outdated and unfair", would give way to a proportional property tax under which 23 per cent of households, concentrated in London and the South East, pay more. That last figure is not hidden; the report is a menu rather than a manifesto, and it costs its own proposals in votes as well as in pounds.

The rentier is not a generation. It is a rate of tax, and rates are written down by people whose names we know.

The objection has to be met rather than waved through, and the Guardian prints it beside the proposal: the Institute for Fiscal Studies argues that aligning capital gains with income tax would risk lowering total tax revenue and investment, and would lead wealthy individuals to move their money or leave the country. The honest reply is that this is an empirical claim about elasticity, not a principle, and that it has been made about every capital tax ever proposed. It also cuts both ways. If the wealthiest can move their money at will and ordinary earners cannot, that asymmetry is itself the thing being described, and a tax system built around it has already conceded the argument.

The scale is not in doubt even where the remedy is. On Gabriel Zucman's figures the top two hundred families in Britain owned the equivalent of about 5 per cent of national income in 1989 and about 22 per cent now, against an economy of just over £3tn in 2025 — a quadrupling in a single working life. While 99 per cent of people pay 40 to 50 per cent of their incomes in tax, billionaires pay a rate equating to 25 per cent at most. The answer proposed is deliberately unclever, which is its merit: 2 per cent above $100m in assets, no exemptions to litigate, and no waiting for the OECD or the UN to coordinate first.

The machinery that built the gap is not mysterious either, and it was public. A decade of asset purchases lowered borrowing costs and raised the price of every house, share and bond already held; the unwinding of it now sits on the public finances as a live fiscal question rather than a monetary footnote. Nobody voted for that transfer and nobody was asked to. It is the clearest case there is that the distribution of wealth in Britain is an artefact of policy, which is also the reason it can be changed by policy.

Where this reading does touch the retired, it touches the house rather than the person, and the distinction is the whole of it. Free personal social care would be paid for by a 1 per cent income tax surcharge on the over-forties, raising £8bn to £9bn, and by a charge secured against the property and recovered after sale or death — which, as the IPPR's Sebastian Rees puts it, would "allow housing wealth to contribute to the cost of reform without requiring people to sell their home when they first need care". Michael Jacobs, who advised Gordon Brown, warns the government against the "moderation and orthodoxy" he thinks ended the last two tenures, and the report's authors insist it is "simply not the case that a British government can no longer govern from the left of centre". The argument is not with pensioners. It is with the idea that none of this can be touched.