Who Owns Britain? UK wealth facts, with sources — independent — verify everything

Is it fair to compare taxes on wages with taxes on wealth?

Yes, and economists have a standard way to do it: measure how much richer each person got in a year and how much tax they paid on that gain. On that measure a nurse pays roughly 30 percent of her gain in tax, while a billionaire whose wealth grows through rising asset prices can pay close to zero.

3.4%
the true tax rate paid by the 25 richest Americans on their wealth growth, 2014 to 2018 — ProPublica

A common objection to the wealth tax argument is that it compares apples with oranges: income tax is a tax on income, and wealth is not income, so the comparison is said to be dishonest. This sounds reasonable, but it gets the logic backwards. The categories themselves are the problem. The tax system labels the gains of working people as income, which is taxed hard, at source, with no choice about timing. It labels the gains of the very wealthy as capital, which is taxed lightly, later, or in many cases never. Pointing at those labels as the reason you cannot compare the two is circular. The labels are the unfairness.

Economists have a proper like-for-like measure, sometimes called Haig-Simons income: how much richer did you get this year, counting everything, and how much tax did you pay on it? Money is money. Your landlord does not care whether you got it from wages or from asset growth. A nurse on 35,000 pounds gains 35,000 pounds of spending power and pays income tax and National Insurance on it immediately. Someone whose 100 million pound portfolio grows by 10 million pounds gains 10 million pounds of spending power. They can borrow against the assets to fund their lifestyle, never sell, and so never trigger a capital gains bill.

When that person dies, the story gets worse. Under UK rules the capital gains clock is reset at death, so gains built up over a lifetime are never taxed at all. The tax was not deferred. It was cancelled. ProPublica ran this exact calculation on leaked tax records of the 25 richest Americans and found a true tax rate of about 3.4 percent on 401 billion dollars of wealth growth between 2014 and 2018. Ordinary employees paid many times that share on far smaller gains.

So the honest response to the apples and oranges objection is to accept it and run the fair comparison. Take two people. Both ended the year richer. One paid nearly a third of her gain in tax with no say in the matter. The other paid almost nothing on a gain hundreds of times larger, using entirely legal tools that only exist for people who own assets. That is apples to apples, and the comparison comes out worse for the wealthy, not better.

“I'm saying can we just stop this situation where working people pay 50% and billionaires pay 0%”— Gary Stevenson, Channel 4 interview

Common questions

Isn't taxing wealth taxing money that has already been taxed?
Mostly no. The bulk of large fortunes is unrealised asset growth, meaning rises in the price of shares, property and land that have never been taxed once. A worker's savings were taxed as income. A billionaire's tenth billion almost never was.
Isn't it wrong to tax gains that only exist on paper?
Those paper gains buy real things. Banks happily lend against them, which is exactly how the very wealthy fund their lifestyles without selling. If an asset is solid enough to borrow millions against, it is solid enough to tax. Wealth tax proposals also include deferral schemes so nobody is forced to sell their home or business.
Don't the rich already pay most of the tax in cash terms?
The top earners on salaries do pay a large share of income tax. But the ultra wealthy whose gains come from assets rather than salaries largely sit outside the income tax system. The comparison that matters is the share of your gain you hand over, and on that measure the very wealthiest pay the least of anyone.

Sources — check them yourself