A funny thing happened in Buenos Aires last Friday: parliamentarians there voted by a chunky majority to slap super-rich Argentines with a tax to pay for the economic damage done by Covid. Anyone sitting on wealth of over 200m Argentinian pesos (£1.8m) will have to pay a one-off levy that the government hopes will raise billions to buy medical equipment, support small business, and help poor neighbourhoods. The so-called “millionaire’s tax” was a remarkable move that has been noted around the world, along with the justification provided by one senator: “We must find points of connection between those who have the most to contribute and those who need it.”
Like Argentina, during this pandemic the UK has suffered a huge loss of life, a historic hit to GDP and a sudden acceleration of already-sharp inequality. Even with the dispensing of vaccines that with any luck will mark the beginning of the end to this health emergency, it is clear that its social, political and economic fallout will be with us for years to come.
This week’s forecast from the Joseph Rowntree Foundation that the Covid recession will see 2 million families, and a million children, struggling to feed and clean themselves or to keep warm is one example. Another is the government’s projection that this tax year it will run up a budget deficit of close to £400bn. Between coronavirus, a chaotic Brexit, and (it should not be forgotten) an already weak economy, the picture swiftly emerging is of businesses and other organisations suffering permanent harm, and both local and national governments having to extend themselves for a long time.
Any politician who looks at this dire situation and starts by wondering how one of the richest societies in human history, with its own sovereign currency, will be able to pay for it is asking the wrong question. We need first to minimise the damage and then worry about the bill, a process that may well take us into the second half of this decade. But at some point Westminster will start debating how to reduce the national debt, and against that backdrop the report from the Wealth Tax Commission makes stimulating reading.
Authored by a team of tax experts, it demonstrates that a one-off 1% wealth tax levied every year for five years on millionaire households would raise up to £260bn – equivalent to increasing VAT by 6% or putting 9p on the basic rate of income tax. The politics of hitting households worth over a million pounds are a separate matter, but in a society exhausted by a decade of austerity that is calling for a fairer social settlement, a wealth tax should be part of the mix.
Britain taxes work far more than it does idle wealth, a situation both unfair and economically damaging. Yet politicians of both main parties have long lacked the stomach to right this wrong. Before this report, there has been no serious work on designing a wealth tax for almost half a century, during which time the gap between rich and poor has grown sharply. This is a debate for all sides to enter, including the Conservatives. Winston Churchill was a great proponent of taxing land, arguing “You can tax wealth or you can tax wages – that is the whole choice which is at the disposal of the chancellor of the exchequer.” Will Boris Johnson heed his guru?
• This article was amended on 28 December 2020. The Wealth Tax Commission report refers to a one-off wealth tax of 5%, payable at 1% per year over five years, rather than a one-off wealth tax of 1% as an earlier version of the article stated.
