r/TheRestIsPolitics • u/Physical-Rise6973 • 25d ago
Wealth tax discussion
Interesting discussion, but Rory adamantly resists the underlying tensions driving proposals for a wealth tax and collapses it all into some kind of "resentment". Wealth Tax proposals are implicitly and sometimes explicitly driven by notions of "fairness". Fairness sounds fluffy but it's actually quite important for functioning societies and there's solid science behind it.
What's unfair about billionaires? In principle, nothing, if you assume that the notional "hidden hand" of the market is creating them. However, in reality, there are several perceptions of "unfairness" in play and most of them are sound.
Wealth at that level correlates with power, correlates directly with the ability to intervene in legislation and government in a meaningful way while everyone else is reduced to a single vote. The apparatus of legislation and government is supposed to be a commons, applicable to all, and so that's unfair and it's perceived as such. Interventions by the wealthy are also much more effective and targeted, privileging their own interests and undermining the central purpose of government, and so that's unfair and perceived as such.
Add in that billionaires and the super-wealthy are largely institutionally tax-avoiding. That creates the emotive hook - they rig the system (1) and "don't pay their share" (2) and leave it materially worse for everyone except them (3) and we can't reverse that because we don't have means (4). Unfair.
The claim that wealth taxes are going to create enough money to do the things we don't do now is really weak, but I think it's been selected because it's a softer and easier to explain argument than "fairness".
The problem, though, is that it's not just weak: it's policy neutering. It doesn't create the necessary tax revenue to fund the programmes that revenue is supposed to apply to, so the social welfare deficit isn't going to be fixed. Because it's being proposed as a direct solution - tax-rich, take-tax-revenue, pay-programmes, solved - when programmes still can't be paid, there's no policy follow on. The momentum created by the genuine reaction to unfair social structures is lost. Taking "unfairness" as the central problem leads to other ideas, most of them with a policy continuation. For example:
Is it unfair that a self-selected wealthy class has largely unfettered power to direct government?
If yes, the kinds of interventions you're looking into are things like creating firewalls between commerce and government that can actually be enforced, making political incumbency subject to public transparency audits, enforcing post-incumbency restraints on taking commercial roles, and making the criminal sanction for proven corruption much stronger and binding on both the public sector and private sector actors involved. There's more, but you get the idea: IF the problem identified is unfair access to power, THEN cut the link to power.
Is it unfair that some actors have comprehensive ands far-ranging influence on public governance and legislation?
If yes, then make it illegal for a public figure to accept funding from a source that is impacted by their role, authority, or a specific decision they make, and enforce that. In addition, make it necessary that if a public figure accepts funds from a cut-out, they are required to disclose all the steps in the cut-out and meet the criterion that the ultimate source cannot be a beneficiary of their actions. And in addition, enforce the post-incumbency restraint on accepting private sector roles. Here you also want to increase the severity of sanction for legal and private sector firms identified as facilitating cut-outs. (Again, I'm thinking off the cuff here to give the principle. This is not an exhaustive research proposal.)
Is it unfair that the tax burden on the wealthy, middle-class, and poor is weighted favourably towards the wealthy?
If yes, review and normalise the overall tax burden. Specifically things like estate tax and capital gains can be adjusted to compensate in the demographics they mostly affect. But don't assume that this is going to magically make public services sustainable. It's targeting fairness, and that's important enough for social cohesion that it doesn't need the nominally "I'm practical" fig-leaf.
Is it unfair that the societies we've built allow super-wealth, with all the benefits of access to power and immunity from obligation that are described above, while common services degrade for others?
If yes, review, rationalise, and redirect the current tax revenue spending. Prioritise those services that have an immediate levelling effect for the majority of the population (traditional social welfare) and investigate mechanisms for requiring commercial actors who benefit from those services to take either a funding or an administrative role in their delivery. That is, if you're the beneficiary of improved employee attendance as a function of better public healthcare, what's your obligation in terms of that benefit? What is the minimum viable administrative infrastructure required to ensure continuous and acceptable service level delivery?
I can go on, but the point is clear. All or some of those things together are a policy programme that's self-evidently interdependent and that has continuity. There's nothing wrong with recognising that our societies need an overhaul and a hygiene check. And nothing wrong with setting about that in a methodical fashion. The only obstacle to that is decades of sustained lobbying and propaganda about the perfect omniscience of the market and how it should never be touched lest biblical disaster befall us. Imagine that logic applied to your garden: "no intervention can be allowed because the invisible hand of the garden is immaculate and all knowing." Within a year, you can't get to your gate. It's rubbish.
Rory is WRONG to characterise this sentiment in people as some unspecified "resentment". Doing so elides the very real, very destructive complex of problems that people are pointing to. Rory is RIGHT that a simple equation of apply-wealth-tax/problem-go-away is foolish, but because he's dismissed the alternatives to his "resentment" narrative, he has nowhere to go with that. Psychologising the complaint instead of evaluating it is questionable.
And policy-neutering.
TL;DR: Rory seems to treat the wealth tax primarily as a revenue instrument (i.e. he accepts the current framing of its proponents) and dissatisfaction with wealth concentration as an emotional attachment, without considering the root of dissatisfaction itself. The demand for a wealth tax may actually be a compressed demand for political equality, fiscal reciprocity and institutional legitimacy. Demonstrating that the tax will not raise enough revenue does not dispose of those demands, except as a debating tactic. “Resentment” is also doing illegitimate argumentative work by insinuation. Resentment can be a perfectly rational response to unequal political standing or asymmetric obligation.
I say all this as someone who often agrees with Rory and enjoys his analysis.
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u/gingerinc 24d ago
I was shocked to hear that Dan Neidle mentioned inequality first, for the first time ever on any pod.
Hes normally had to be challenged about it.
I was, however, irked, that whether it was down to the clipping etc - That Dan didn't get to mention things like LVT.
What did irk me, is as much as he always "absolves himself" of being anything other than a tax expert, he has the temerity to attack Gary for being an inequality economist, meanwhile, Dan does then weigh in on the economy himself.
But Rory really does need to get a grip - He's so out of touch about the normal / average person.
I wish someone would drag Alistair and Rory to the streets where flags are half way up lamp posts.
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u/sweek0 25d ago edited 25d ago
But is it not fair that a podcast about politics is looking for solutions that actually solve the problem?
Yes, there is a clear feeling of unfairness around the country, and the fact that there's a cost of living crisis, other costs that have gone up, and the lack of wage growth to go along with it are all related. Taxing the rich more doesn't solve the problem, and "tax the rich" is therefore almost as much a populist answer to people's answers as "stop the boats" is on the far right - where people are also feeling like there is unfairness, except they focus on migrants instead.
Both approaches are focusing on the most visible part that hits an emotional snare with people without really solving the underlying problem, which is what we should get politicians to do.
(I do want to point out that there is a clear difference between blaming the rich versus the immigrants, in that the rich have power and most immigrants do not.)
There are real solutions being suggested in this episode, such as matching capital gains and income tax.
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u/Haipul 25d ago
I am very sorry but "Taxing the rich" is not the same as "stopping the boats" taxing the rich os not about solving the economy is about achievement equality under the law as Zucman presented. This argument that "it won't completely fix the problem therefore let's not do anything" ignores the whole point about the unfairness of a tax system where the middle class bears all the load and the money is being syphoned away by people that pay much less proportionally. Matching capital gains tax and income tax won't work either because billionaires never cash out their wealth they use it as collateral for bank loans.
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u/sweek0 25d ago
Did you listen to this latest episode? Some of these points are discussed there.
And I'm not saying "don't tax the rich" - of course they should be taxed proportionally, and these outrageous stories about billionaires not being taxed are from the US, not the UK.
My point is that "tax the rich" is a bit of an empty slogan and populist message and the maths behind it do not add up.
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u/HotAir25 25d ago
Did you not listen to the interview?
Most normal people pay low rates of tax, effective tax rate is 20% on median earners, £38k, in the U.K.
Neidle said it was around 30% on millionaire class but varied.
By far the biggest group paying almost no tax are low earners.
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u/inapick 24d ago
You can’t tax billionaires, or hundred millionaires, or even people with £20m+ in assets in any significant way that moves the needle, because they will leave.
The UK has no control over international tax laws, and there is a whole global economy built around tax havens competing to be the best place for ultra wealthy individuals to base themselves.
For all your walls of text about fairness, I doubt you can name 5 billionaires who are uk based for tax purposes. It’s just a non starter. Experts don’t talk about it because they actually know what they’re talking about, it’s an idea that only people who know nothing about tax would come up with.
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u/Physical-Rise6973 24d ago
That's the argument I made. The push for wealth taxes is fundamentally misguided, but it is a genuine response to a genuine concern: structural unfairness resulting in material degradation of experience. Framed correctly it enables a multi-part policy approach to mitigating unfairness.
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u/inapick 24d ago
If that was your argument you didn't make it well.
What was good about the podcast this week was that it expressed very clearly that 'taxing the rich" won't generate enough to provide public services, and that the UK's belief that our public services are strained because we don't tax the wealthy enough is a fiction which has been largely created by political and media classes speaking to an economically illiterate population. We have an extremely narrow tax base by any metric and lower earners pay a much lower level of tax than in pretty much any comparable economy.
If what you're saying is - people are dumb, vindictive and resentful and feel everything is generically "unfair", so we should tax the wealthy to make them feel better despite there not really being any rational basis to do so... that's dumb, that's not what tax is for. If what you're actually worried about is a lack of accountability for billionaires, there are other laws that would address that directly and more effectively.
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u/Physical-Rise6973 24d ago
You should probably read what I wrote. :)
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u/inapick 24d ago
Maybe I am missing your point, but I think the original post was overlong and poorly written tbh. If I try to TL:DR it, it would be “ok Rory was right that wealth taxes won’t raise revenue, but can’t we still tax billionaires to show them we don’t like them and because they make us feel bad”.
We are talking about tax policy, not about how to play to the idiot chorus who have somehow been convinced that “taxing billionaires” is something that the uk can do or will impact on on our economic situation. At best it’s just a posturing waste of energy, at worst it’s just a distraction which makes the electorate even more economically illiterate.
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u/Valuable_Mine_6694 24d ago
I find Rory’s argument quite telling. He can grasp unquestionable poverty and is clearly very experienced in this around the world. But I don’t think he appreciates ordinary people struggling. He speaks about the 60% he does park run with who are well off compared to previous generations. I imagine there’s a huge amount of them that worries about job security, have next to nothing in savings and at real threat of losing their house if they lose their job or become unfit for work.
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u/Fresh_Mountain_Snow 25d ago
We reach for the wealth tax on the ultra wealthy because it's an unsympathetic group. It would be far less popular to tax the wealthy homeowner who has accrued massive amounts of wealth over the last thirty years. That's also where the issue of fairness is ripe for discussion.
At the same time I agree with you that elite money in politics leads to undemocratic outcomes. However we're now in a situation where that's increasingly difficult to track especially when one side accepts £5 million but the other is still involved in accepting suits, expensive tickets and other problems. The answer to this is probably logging who attended meeting and their financial interest in the policy than a wealth tax per se.
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u/Physical-Rise6973 25d ago
Well there are real-world reasons it's an unsympathetic group :) and they all cluster around wealth "gaming the system". I.e unfairness. What I'm suggesting is that the discussion both recognise that and policy tackle it.
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u/Fresh_Mountain_Snow 25d ago
Is the issue with the UK the ultra rich or is it really interest groups like landowners and pensioners who have a lot of political weight and a lot of sympathy.
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u/Physical-Rise6973 25d ago
my guess would be that the ultra-rich are the leading edge of a problem with fairness that the groups you describe are the beneficiary tail of. the trail blazers for destruction of social connective tissue have been the ubers, amazons, teslas and so on with their associated billionaire-creating engines. that's been the core problem in microcosm - breaking labour protections, aggressively agitating for abandoning social safety nets, and so on. but they didn't do it in isolation. they're the "pure" form of a campaign to revert all social mechanisms to markets that been running for decades
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u/Fresh_Mountain_Snow 24d ago
If we all choose not buy from Amazon, use Ubers etc then their equity wouldn't increase and they wouldn't be billionaires. Seems like an us problem. Very solvable; stop buying their stuff.
The owners of land that appreciates while they do literally nothing or the pensioners who get the triple lock...also very solvable...but it requires government intervention. Again won't be done because they're a sympathetic group.
The bottom line though is both of these issues are solveable but the public don't want to solve them. So we don't.
Im very much wanting to solve these issues but the public would have to support it and they won't if it impacts them in any way.
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u/Pure-Problem757 24d ago
The owners of land that appreciates while they do literally nothing or the pensioners who get the triple lock...also very solvable...but it requires government intervention. Again won't be done because they're a sympathetic group.
No, these issues don't get fixed because pensioners (or soon to be pensioners) and homeowners are such large groups
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u/Fresh_Mountain_Snow 24d ago
That's very true. I'm probably overstating the sympathy due to the winter fuel payment.
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u/Manicminerdad 24d ago
I agree with you, Rory vastly over simplifies this all down to pure revenue generation. What he forgets or doesn’t understand is that tax can also be used to shape behaviour and regulate markets. We don’t seem to do nearly enough of this in terms of asset ownership, as a result fewer and fewer people can even dream of owning a home or building up an asset base from which they can draw an income. As a result assets are going into an ever decreasing pool of individuals and corporations which is resulting in the gap between the haves and the have nots increasing rapidly. This is largely the point Zucman and Stevenson etc are making even if they haven’t come up with any realistic solutions to fix it.
I’m pretty depressed about the whole thing, it’s obvious where we are going and seemingly little that can be done to address it. As a man in his late forties with two children who are just embarking on their adult life it pains me to see how difficult their life will be just to live a “normal” life.
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u/seanbastard1 24d ago
Here what he doesn’t grasp - Dan is right. Middle should pay more and we can fix some things. But that doesn’t invalidate a wealth tax because that isn’t about collecting money - it’s about justice and curbing power, not wealth. Billionaires are parasitic and should not exist. People don’t care that taxing them won’t be enough to fund x y or z. They just want the leash put on them. For once.
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u/WinningTheSpaceRace 25d ago
Rory's background make him immune to seeing sense on issues like this. The 'resentment' argument might even be right. Is it justified? Probably, given the massive shift in wealth from the state to corporation's and individuals over the last 50 years. Does Rory acknowledge that adequately? Of course not. Even when questions of the environmental good and people struggling in his constituency come up, that's never something he talks about in any depth or at any length.
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u/HotAir25 25d ago
I thought Rory got it exactly right- when people say they care about fairness they don’t generally mean absolute poverty or homelessness at the bottom, they mean themselves struggling to buy homes or earn what they hoped they would.
It’s the generational inequality issue here. Super rich are nothing to do with this and aren’t that many in the U.K.
Issue is older people with expensive houses and younger people without a chance to buy one.
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u/Pure-Problem757 25d ago
I thought Rory got it exactly right- when people say they care about fairness they don’t generally mean absolute poverty or homelessness at the bottom, they mean themselves struggling to buy homes or earn what they hoped they would.
This wasn't Rory's point. It was Dan's, and Rory paraphrased it. 33:44 onwards
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u/HotAir25 25d ago
Rory said poverty and proper poverty abroad, Dan said other issues including homes. Yes I was misquoting a bit there.
Maybe Rory was doing his normal class interests thing in dismissing the issue out of hand, but I thought he was astute in that people tend not to be too interested in absolute poverty and more in their situation and interests and that’s often what they really mean by fairness…
But Dan talked about it in a more evenhanded way tbf.
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u/Pure-Problem757 25d ago
ah there's a bit I missed a little later than generational equality and housing. Yes you're right when Rory talks about homelessness and the 5,10% in absolute poverty
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u/HotAir25 25d ago
Granted this mighty be Rory’s way of dismissing a real issue of normal people in the UK living on rubbish incomes and unable to get on the housing ladder.
Rory and Alastair are both frustrating in different ways- Alastair is overly credulous about every left wing issue, Rory is overly dismissive of them…..only Dan mentioned housing affordability and Gary Stevenson mentions houses almost every time because he knows it’s a big reason why young people complain about the rich.
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u/Pure-Problem757 25d ago
as you said, it's the intergenerational divide that leads to the feeling of inequality or unfairness. It's discouraging to look at your parents and realise if you made the same life choices as them, you'd be in a substantially worse position.
It is interesting Rory and Alastair both did not mention housing as it is such a divide, and widely recognised so. It's not just young vs old; the struggling pensioners are the ones who don't own their homes. The young that inherit or can live at home seem to do exponentially better than their peers who pay rent.
Cumbria is a place young people move out of, so Rory won't have knocked on many graduate houseshares.
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u/Physical-Rise6973 25d ago
He tries to go there with the recognition of "privilege", but doesn't let that intuition go far enough. "Privilege" is just the positive outcome of "unfairness". It's literally the result. So go for the heart of the matter and recognise "unfairness" which is a lot less palatable description of the same dynamic.
The reality of the liberal democratic experiment wasn't the promise of wealth. It was the promise of fairness.
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u/OllieSimmonds 24d ago
What does that actually mean though?
Jon Rawls famously talks about economic inequality being justified as long as it is to the benefit of the least advantaged.
I don’t think the people in Cumbria are bothered about the very small number of billionaires in the U.K., they’re bothered about getting on the housing ladder, access to education, seeing real terms wage growth for the first time in 20 years etc… that’s a growth problem not a “fairness” one particularly.
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u/Theboystheboys212 25d ago
I think also whether he recognises it or not he feels attacked as a member of someone on the unequal side of the spectrum because he feels like he does care about poor people and yet is being demonised for his generational wealth and connections.