Blinding genius

Prem Sikka.

Let\’s have a 25% wealth tax.

25% of the gross assets of the richest 1,000 people in the country.

As he points out, this would raise about half the deficit.

So, err, what do you do in 6 months time then? All the rich having left the country by then of course……

23 thoughts on “Blinding genius”

  1. Oooh!!! I know. Let’s soak the rest. Top 1% of earners. That should do it. Let’s whack up the income tax rate to 100% YAY!

    Net result, income tax take falls by 25% at least – that’s what that lot currently pay – you can bet your bottom dollar they’ll be taking that somewhere else.

  2. I think Mr Sikka has confused the idea of debt (being an absolute figure) and a deficit (which continues to add to the debt every year). Not surprising really given that pretty much all the politicians do it too. But I would have thought a Professor of Accounting MIGHT just be able to spot the flaw in his grand plan………………….hey ho, at least it gives a nice market signal for anyone thinking of studying accounting at UoE that somewhere else might be a better bet.

  3. So, err, what do you do in 6 months time then? All the rich having left the country by then of course.

    Just because 1,000 people have left the country, there will still be 1,000 people who will be considered the richest upon whom you can tax.

    Repeat ad-absurdum until we’ve eradicated child poverty because every family will eventually be above 50% of median income.

    Simples!

  4. actually, standard econ says one-off lump sum taxes are efficient. So long as you commit to not doing it again.

    and let’s not worry too much about these individuals leaving – most of them aren’t even former wealth creators, they’re landlords or thieves (Abramovich). What matters is whether the act would prompt future wealth creators to leave. There’s not so much reason to think it would.

    look at it as a one-off confiscation of the wealth of the very wealthy, used to lower future tax rates for all of us.

    the ownership of their assets would probably move into a less concentrated form – they’d have to sell assets to pay the tax, and the buyers would most likely be institutions – funds, owned by many investors.

    oh god, I’m only playing devils advocate a bit – settle down

  5. Luis

    Some months ago at Ritchie’s place, I suggested that getting large lump sum taxes from the rich might be a good idea – but there had to be something in it for them.

    I suggested an idea that they could pay a large lump sum, and buy out their future tax liabilities, either for life or a fixed period.

    HMG gets the lump sums to clear debts. And is freed from ongoing collection costs. The rich would be freed up from their tax hassles and could get on with doing more of what got them rich in the first place. And no incentive to hide money offshore.

    I suggested that the whole thing should be voluntary, so we’d need to find a fair figure: big enough to be a fair contribution, small enough to get the fish to bite. The arrangement would have to be done as a contract binding on future governments. I know governments can retrospectively tear up contracts but it isn’t something they do often, and probably wouldn’t try to diddle this type of taxpayer.

    Ritchie ended up calling me ‘autistic’. He thought that by refusing to let the rich be soaked again and again, it was somehow an affront to democracy. It was lost on him that these rich dudes can leave or even get hit by a bus and the tax gravytrain can end at any time anyway.

    I know there are wrinkles to the idea, but is there something there?

  6. “standard econ says one-off lump sum taxes are efficient. So long as you commit to not doing it again.”

    A useful reminder that “standard econ” is profoundly stupid; how can a meaningful commitment to “not doing it again” be made? Cross my heart and hope to die?

  7. WOW dearieme, no ‘standard economist’ has ever thought of that before. let’s see, we could invent a whole branch of economics that looks at commitment problems… oh maybe something called time-inconsistency, contract theory … this could be a very fruitful vein.

    dearieme, any sensible theory of taxation will treat anything one-off differently from anything not one-off. standard theory would be very silly to do otherwise. this doesn’t mean standard theory includes the assertion that such things are often seen.

    (although that one-off tax on banker’s bonuses probably was, and er … standard theory, tells us the effects of it were very different from what a repeated tax would have been)

    it’s amazing how quick people are to assume that economists who have spent their lives studying X haven’t thought about a point that’s obvious to anyone with half a brain. Murphy does that all the time too.

  8. On a less erudite note, Ritchie really is an utter twat isn’t he?

    I posted a comment the other day about the Vodafone business and saying basically that rather than chasing big corporations for tax they don’t owe, we’d be better off having a flat tax set at 25%, and no tax collectors, accountants or consultants, and he threw his toys out of the pram.

    Arse.

  9. So long as you commit to not doing it again.

    This isn’t quite right. What matters is whether people believe that you’re not going to do it again. If you commit to not doing it again, and people don’t believe your commitment, then they’ll act as if it was going to happen again.

    most of them aren’t even former wealth creators, they’re landlords or thieves

    Umm, how do you get to be ultra-wealthy only by being a landlord? And, if you want to tax landlords, just tax land, no need to focus on the richest 1000 generally.

    As for thieves, we already have a legal system. If you think that it’s fine to take away people’s wealth just becuase person x calls them a thief, let’s see you apply this rule to yourself.

    look at it as a one-off confiscation of the wealth of the very wealthy, used to lower future tax rates for all of us.

    Why would I want to do that? I’m not one of those new-age nitwits who believes that reality is just a form of illusion. I don’t go around telling cancer sufferers that the only reason they have cancer is that they didn’t think positively enough, and I don’t pray for a Mercedes Benz.

  10. Anyone who believes a government when it says ‘Trust us, its a one off tax’ needs their head examining. Its up there with ‘The cheque is in the post’ and ‘I’ll pull out, honest’.

  11. Aren’ t the ConDems telling us how patriotic they are and we ar ein it all together? If so, why should they object to helping the country. You very carefully faild to mention that Warren Buffett has offered to pay more tax to help his country. In fact, any financial contribution from the mega-rich would help. They can afford it and if you read the article they will still have plenty to go on. If Philip Green did not receive any diviends or salary for 3-5 years, he will still have plenty.

    Tim, Will you be giving up your tax haven perks? I won’t hold my breath.

  12. “Warren Buffett has offered to pay more tax to help his country.” The US Treasury accepts donations. Buffet hasn’t made any. In fact, he has carefully arranged his affairs so that his estate won’t pay any tax.
    Buffet could give the government 90% of his income without having it make a notable difference in his lifestyle, so why would high tax bother him?. Can you give up 90% of your income, Davinder?

  13. @Davinder Kohli: While I’m sure Philip Green et al ‘can afford’ it, that’s not the point. There is a point of principle at stake. They are as entitled to keep their billions as you are a £10 note. Once a country starts to target individuals, however rich they are, its a slippery slope. First the top 1000, then the top 10000, then the top 100000 and so on and so forth. They’ll always be someone ready to spout out ‘Ooh it doesn’t matter, they can afford it.’

    In fact there’s undoubtedly plenty of slum dwellers in the world who could say the same thing about you, or indeed anyone in the developed world. One off taxes aren’t so appealing when its you in the cross hairs are they?

  14. Aren’ t the ConDems telling us how patriotic they are

    Are they?

    You very carefully faild to mention that Warren Buffett has offered to pay more tax to help his country.

    Um, stupid question time, but isn’t he American, and thus, given US rules about dual citizenship, not British?

    They can afford it and if you read the article they will still have plenty to go on.

    Um, and that gives you a right to their income because?

    Will you be giving up your tax haven perks? I won’t hold my breath.

    I don’t follow. What’s the hypocrisy you are accusing Tim of? If someone is opposed to higher taxes for other people, they’re hardly being hypocritical if they don’t like paying them themselves. It’s the people who think that other people should be paying more tax who are the ones open to charges of hypocrisy.

  15. Because your many-times-great grandfather killed some Saxons.

    Interesting question, how many members of the current aristocracy have direct title back that far? Not royalty, what with the War of the Roses and the Tudors taking over, and the Civil War.

  16. “Interesting question, how many members of the current aristocracy have direct title back that far?”

    Quite. And even of the ones that do, they may be aristocracy in title, but there will be far fewer who are wealthy on this scale. The reason? They make – over a course not of a lifetime, but many generations – what would otherwise be suboptimal decisions.

    The goal is to stay in a particular place in a particular property, rather than moving around to where the most valuable work/returns may be.

  17. Actually, I was more thinking of things like getting on the wrong side of Henry VIII, and winding up being executed.

  18. Why not sell the rich titles the rank varying with the donation.
    The right to wear top hats and gold livery might be an enticement.
    Even better sell places in the house of lords to the rich. Good could come from this.

Leave a Reply

Your email address will not be published. Required fields are marked *