It is the UK’s only really effective tax on wealth itself. Wealth inequality is increasing rapidly in the UK. Around the world it is seen as a major issue. Organisations such as the International Monetary Fund[iv], World Bank[v] and Organisation for Economic Cooperation and Development[vi], none of which are seen as hotbeds of socialism, suggest that taxes are required to address this issue and create more equal societies.
More equal societies tend to be more socially and politically harmonious than unequal ones.
They also tend to be more prosperous and see more economic growth as those with lower wealth (and incomes) spend more of what they have, and so turn a given level of income into greater economic activity than do unequal ones.
The wealth effect works the other way around. When our wealth increases we spend more of our incomes as we need to save less to smooth income over our lifetimes. This is why falling asset prices are correlated with falls in consumer spending – the savings rate rises.
Spudda really ought to try getting the signs right in his economic musings.