The rich don’t need tax rate hikes to pay more tax
Last week at Davos, a group of self-declared rich people demanded that elected politicians force them to pay more tax. The “patriotic millionaires" group announced in a letter, signed by 260 of them, that they would be “proud to pay more" if it were to make for better societies. They also insisted that they were not alone in wanting to pay more.
Far from it. Surveys done by the group showed that 75% of those who responded supported a 2% annual tax on the wealth of billionaires and 58% supported the same on those with more than $10 million in assets. I’m not sure any of them have thought this through properly.
That’s because all taxes creep. The patriotic millionaires might say their tax will only be for the very wealthy, but we all know how that works out. The threshold will be dropped.
First, it will be those with $10 million, then $5 million, then suddenly those with a net worth of $2 million will be considered to have broad enough shoulders to take on an extra burden. Then there will be fiscal drag—whatever the threshold is, it will not be moved up in line with inflation. Before too long, 20% of [a rich] nation will be paying the tax—and all those who supported it on the basis that only other people would be paying it will feel a little disappointed (a good few of the signatories of the letter will be on this list).
It’s this kind of relentless fiscal drag that means that by 2027, one in five taxpayers in the UK look likely to have a marginal rate of 40%-plus. You might also note that most countries already have an awful lot of levies that act as effective wealth taxes. In the UK, there is inheritance tax, capital gains tax (which isn’t indexed to inflation and therefore taxes real wealth) and stamp duty (on houses
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