Wealth taxes are in need of comprehensive reform, according to a report from the Institute for Public Policy Research. But the authors stress the need for an approach that takes into account the political realities facing politicians attempting to introduce change.
- The case for wealth taxes is often made on theoretical grounds, focusing on arguments of economic efficiency and social justice, without an analysis of the political context. Wealth taxes are not a panacea for fiscal pressures, nor are they a silver bullet for achieving greater social justice.
- The UK already collects more money through property and wealth taxes than almost any other OECD country, as a proportion of GDP.
- Receipts from some forms of wealth taxation can be more volatile than other sources because they move in line with asset prices.
- Targeting the ‘super-rich’ is politically attractive, but raising substantially more money through wealth taxes may require a much wider tax base. On the other hand, replacing the current 'incoherent' system of wealth taxes with something more sensible (such as replacing council tax with a property tax) may leave large numbers of people worse off.
- The report suggests focusing on reforms in three specific areas: replacing council tax with either a housing consumption tax or a property tax; a new tax on the value of high-value but undeveloped land; and replacing inheritance tax with a lifetime receipts tax.
Source: Kayte Lawton and Howard Reed, Property and Wealth Taxes in the UK: The Context for Reform, Institute for Public Policy Research
Links: Report | Summary