Trader Sarcasm

I’m calling BS on these 120 millionaires calling to be taxed more. Look closely at who signed. A retired footballer whose been paid millions by taxpayers. A retired trader who’s net worth is well under $5M. Retired musicians, film directors and some heirs. People who finished building years ago - half of them aren’t worth the $10M threshold they think needs the wealth tax. Their wealth sits in liquid portfolios. The tax they propose either doesn’t apply to them or they have liquidity to pay it. Now picture a founder with a £50m biotech firm. Her wealth isn't in a bank account. It's based on a speculative VC round. To pay 2% she has to rip £800k a year out of her business or sell it down piece by piece until someone else owns it. Or imagine the restauranteur whose chain is finally having a profitable year after a decade of losses. A PE deal to expand gives him a paper worth of £60M and he now has to find £1M a year, every year personally if he wants to grow. 

Imagine the property developer couple who made a lifetime of delayed gratification and good decisions. Their portfolio makes £4M profit which is barely enough to cover the £2M in wealth taxes per year after they draw it from their company and pay the corporation tax - 100% essentially goes to tax. The signatories aren't offering to pay a tax. They're volunteering someone else to. Someone who is still building, investing, growing, hiring. HMRC already accepts voluntary payments. Any of these self-aggrandising millionaires could send extra money tomorrow. ALL of them benefited from lower tax rates and should pay the difference if they want to make a start. None of them will. They don't want to give more. They want a law that forces others to. The wealth tax they propose won't work. It will backfire. We don't need to guess. In 1990, twelve OECD countries had a wealth tax. Today it's three. Sweden scrapped theirs. Germany suspended theirs. France tried it for decades, watched tens of thousands of wealthy families leave, collected a fraction of what was promised, and Macron repealed it because the country was losing more than it raised. The £24bn projection assumes nobody changes their behaviour. Nobody has ever designed a tax where nobody changes their behaviour. Liquid wealth leaves. Illiquid wealth, the businesses and farms and employers, stays behind and gets squeezed. The tax doesn't catch the guy with the yacht. It catches the guy with the factory. It will end up hitting normal people. Every tax "on the very richest" drifts downwards. Income tax started in 1799 as a temporary 3% levy on the richest 3% to fight Napoleon. Now workers are paying a 45% marginal rate. Inheritance tax was designed for stately homes and now catches three-bed semis in Surrey. VAT launched at 8%. It's now 20%. When the wealth tax raises a fraction of what was promised, and it will, no Chancellor repeals it. They lower the threshold. £10m becomes £5m becomes £2m becomes your parents' house. Here's what I'd say to the 120… If you want your capital serving Britain, I'm with you. The best way is to back founders. Fund the startups and scale-ups on great terms like they do in the USA. Help build companies that scale here instead of selling early to America. Growing businesses already pour money into the Treasury through corporation tax, employer's NI and PAYE on every job they create. Back success and productivity. Stop rewarding fiscal deficits with good money after bad. That's harder than signing a letter. You don’t get to look like a socialist super-hero. It's also the only version of "proud to pay" that's ever made a country richer. Don't pretend to ask the government to tax you… or people twice as rich as you. Invest in real growth and success.

One of the reasons I am so against wealth taxes is that they cross a line of giving government the power to seize property. Wealth is something people build with after-tax money. They earn, pay tax and then take a risk and invest their savings. That is the mechanism for creating wealth whether it be starting a business or buying and improving assets. Once you finally succeed, wealth taxes allow the government to simply reach into your life, put a value on what you own and take it. They are literally seizing your property. Property you own because of money you first earned and paid tax on. This is different in an important way from income tax. Income tax happens as you earn and … importantly…. you can choose to stop earning at any point if you want to. If a Government chose to tax income at 50% and you didn’t want to pay it, you could simply withhold your labour and choose not work. Not the same with a wealth tax - once you own it, it’s not actually yours… at any point the government can simply adjust the rate of wealth tax and remove it from you. Wealth tax is fundamental a breach in the principle of your right to own property. It’s also a slippery slope. Every tax is brought in as “only for the rich” and pretty soon it’s on everyone. There will be a situation whereby 51% of the population can simply vote to take everything away from the 49% who have more to take. Very reliably once there is a breach in the right to own property it descends into mob rule. The wealthy aren’t silly, they know this is the case and respond by removing all investment and wealth out of any country that breaches the principle of ownership of property. So @garyseconomics asks what I’m thinking? I’m thinking that a wealth tax is breach in the fundamental principle of the right to own property and a pathway to mob rule. If we are lucky it will do more harm to an economy than good. If it really takes off it will crash the economy.

The next PM is excited to harness the energy of @garyseconomics’s mob. This will mean the UK will become the next failed experiment on wealth taxes. How can I be so sure that wealth taxes won’t work? Let me count the ways they will be a disaster… - the UK is already the highest taxed place to be a top earner or wealthy. More taxes at the top will push more away than it collects. - The engine room of the economy is digital assets that can based anywhere. The only wealth that will be taxed is old money fortunes tied up in real estate… the new fortunes will leave the anti-wealth UK. - wealth is highly subjective. It’s never a clean number like income or an actual sale. Wealth is a forecast, a projection, a useful guess. Hence it can be litigated and debated - and it will. Wealth taxes tie up the courts. - it’s not being introduced because it works, it’s being introduced because people are angry. Mostly they are angry at Elon, Jeff, Mark and Larry… all the American Billionaires who will be buying up deflated UK assets after wealth taxes set fire to their valuations. The mob wants blood that is out of reach. - there’s not that much to tax. The UKs billionaires are already leaving. The total wealth held by billionaires in the UK is sub £700B (less than Elon’s wealth). There’’s only technically 150 of them remaining and most have already started to leave. I’d be amazed if the tax collects more than a few billion. - this tax is going to end up destroying the middle class. Mark my words… when the rich leave the middle class have to cover the gap that they leave behind. One way that will happen is that they will use the wealth tax framework to tax nice family homes, mind sized businesses, decent sized pension pots. It will be a race to the bottom. - Wealth taxes have been tried 15 times and tolled back 12. The only places that have wealth taxes don’t have IHT or CGT. Wealthy people pay less than they otherwise would have. It’s a wealth tax in name only. The UK has wealth taxes now in practice (School VAT, IHT, Stamp Duty,etc) but not in name. Anyway, if it is the will of the people then so be it. I will be advising entrepreneurs to look elsewhere though - it simply doesn’t make sense to build something of value in a country that despises value creation.