Theft by instalments
The government is reportedly considering the introduction of a wealth tax. A wealth tax is a tax on the net worth of individuals - that is, the value of all assets minus debts. This is different from income tax levied on earnings or taxes on consumption, such as VAT.
Its supporters argue that citizens implicitly agree to taxation in exchange for public goods such as infrastructure, healthcare, security, and law courts. They see taxation as a legitimate function of a democratic government, and point out that a tax passed by Parliament, is legal under UK law, and cannot by definition be regarded as theft.
In practical terms, they suggest that a wealth tax could address extreme inequality, potentially stabilizing democracy and reducing social unrest. It reflects a view that wealth accumulation depends on public institutions such as roads, education, and the rule of law, and therefore sharing some of it is fair.
On the other hand, to justify it as ‘reducing social unrest’ could be rephrased as ‘give us money or we’ll beat you up and run riot.’
While the UK does not currently have a wealth tax, it has taxes that touch on wealth, taxes such as Inheritance Tax, Capital Gains Tax, and Council Tax. The problem with a wealth tax is that it is levied on possessions, not on transactions. I earn money, the state takes a cut. I buy something, the state takes a cut. If I earn money on my possessions, the state takes a cut. If I cash in some of my possessions to buy things, the state takes a cut. But for the state to take a cut of what I simply own, without doing anything with it, is certainly a moral theft because it is taken without consent and by coercion.
Proponents say it would be a one-off, but as Milton Friedman put it, “Nothing is more permanent than a temporary government program.” Pitt’s temporary income tax to pay for the Revolutionary and Napoleonic Wars is still with us. Kaiser Wilhelm II’s champagne tax was a temporary measure to fund a high seas fleet. The fleet lies at the bottom of the sea, but Germans still pay the tax on fizz. If a one-off wealth tax would be theft, an annual wealth tax would be theft by instalments.
In practical terms, it is a disincentive to save or invest. It punishes success, discourages entrepreneurship, and erodes the foundation of a free market economy. Labour’s tax on the worldwide earnings and inheritance of non-doms is seeing them flee our shores by the hundred thousand. A wealth tax would cause many more to leave, taking their wealth and their taxable activities with them. If it promoted equality, it would be by making us equally poorer. It is immoral in theory and would be disastrous in practice.
Madsen Pirie