Jamie Hambro is sceptical of the insistence that a wealth tax will be a one off imposition:
I have some difficulty with thinking of a wealth tax as a one-off if it is repeated for five consecutive years. And I doubt it will end after five years. Income tax was introduced in 1799 as a one-off tax to help pay the costs of the Napoleonic Wars (this after a wealth tax on houses, horses and carriages and servants and another new tax – inheritance tax – failed to raise enough).
That seems a fair surmise to us. The standard economics of taxation tells us that wealth taxes are a bad idea. The little get out available being that a one off wealth tax, unannounced and impossible to dodge, isn’t so bad. But that isn’t so bad bit rests, entirely and wholly, on the one off nature of it. Which is why those who would tax wealth are telling us it will be a one off, so that it can be introduced and then made more permanent.
Yes, we can come across as a little cynical about the political process at times. But then we’ve got good reason to be. From one of the Advani and Summers papers about this wealth tax:
We do not include a measure of the expected individual value for future public pension payments. Clearly there is a relationship between the existence of public sector pensions and household saving decisions (Lachowska and Myck, 2018) but there is no contractual obligation for the government to maintain future pension payments at levels currently expected. In which case, a consistent alternative to our approach would be to include the effective value of an individual’s entitlement to the entire existing social security system.
We don’t include any part of the welfare state - not even the state pension - in our estimations of wealth because without a sound contractual relationship we can’t trust the government to actually pay such things.
But we can and must trust these same politicians when they say that a wealth tax will be a one off event. Without any of that pesky nonsense of a contract of course.
The insistence being therefore that politics is dodgy when considering paying money out but entirely reliable, keeping its word, when raking it in. We really don’t think it is cynical to suggest that electoral expediency might not work out that way.