Should we shift tax from income to wealth?
Although the American Right is obsessed about tax, taxation is necessary to fund the programmes and activities that make a civilised society. Depending on how we structure our taxation systems, tax can also have overall social policy objectives such as promoting entrepreneurship or reducing inequality. I am very interested in the consequences for both societies and individuals of substantial inequalities of income and wealth as explored in the seminal work “The Spirit Level” which I have reviewed here.
Broadly speaking one can tax activities (which is why we have value added tax), income (which is why we have income tax) or wealth (which is why we have inheritance tax and why some are advocating a land value tax). I’m interested in the debate about shifting tax from income to wealth as discussed here. This approach has the support of sections of the Labour and Liberal Democrat parties as explained here.
Why is this debate important? In the UK, the best paid 1% of the population receives about 8% of the national income, while the wealthiest 1% owns 23% of national wealth. This inequality distorts social outcomes undermines incentive.
One of my short stories revolves around the effort of a politician to introduce a wealth tax. You can read “The PM And The MP” here.