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- [00:01]
A
A wealth tax feels like a simplistic cop out.
- [00:05]
B
The power that they confer, power to influence politics in the way that Musk does creates dynasties a bit like the pharaohs of Egypt. Well, they are interfering in British politics.
- [00:15]
A
They are. But the answer to that isn't tax. There's nothing our tax system could do to stop that. On the other hand, we could have had a rule that said people living outside the UK can't make political donations. You could have done that, didn't do that.
- [00:27]
C
The wealth inequality can't be solved simply by tweaking capital. Gid what is your view or this idea then? Dan we're delighted to say that this year the rest is money is powered by Octopus Energy. So we're joined by its founder and CEO Greg Jackson. So Greg, I heard that the prices of solar and home battery storage are falling. So is it worth waiting before you invest in them?
- [00:52]
A
First of all, we never know what's going to happen to the future price of energy. It could go up or go down. So I think when people try to do a really detailed payback calculation, the problem is you don't really know what the alternative. But I don't know many people who've regretted getting these technologies because the one thing whenever you get them is it helps insulate the against the volatility of the market prices. And so as far as I can tell, the vast majority of people who've made that decision are happy with it.
- [01:20]
C
Greg, thank you very much. Now on with today's episode.
- [01:24]
D
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- [03:03]
B
Hello and welcome to the Rest is Money with me, Robert Pestle.
- [03:05]
C
And me Steph McGovern. And back with us, Dan Needle. Thank you very much for joining us again. We love having you on the show. We wanted to talk to you today about wealth tax. How do you make sure the richest people in the world are contributing enough to tax? And recently we had the prominent economist on, Gabriel Zucman, you know, who was obviously globally recognized for his research on wealth inequality and tax havens and corporate tax evasion. And one of his famous proposals is this idea of a coordinated 2% tax on billionaires. And you know, he talked to us about how billionaires fortunes have grown much faster than their tax bills. And so this was his idea for trying to get those billionaires to actually contribute something in terms of attacks and income tax. A fairer way of doing it. What is your view on this idea then Dan?
- [03:58]
A
I think it's just amazingly delusional. Where are the billionaires in the world? Countries with the most billionaires in order, I think US, China, India, Germany, Russia, between them, something like 60, 70 of the world's billionaires in those countries. Every one of those countries is not going to pass this wealth tax. This is a pure talking shop. It's a sixth form debating society and not even a very good one. Not going to happen.
- [04:25]
B
All right, so look on that he does say, because we obviously made that point to him, that if an individual country like the UK were to do it on its own, you know, implement, you know, 2% or so tax on the wealth of the billionaires. Well, do they work? Some of them Anyway, let's, let's, let's push that to one side anyway. Who've got their assets? We've got a lot of their assets here. If you introduced a 2% tax and then you simultaneously introduced a massive exit tax on them so that if they then did try to leave the country and relocate both themselves and their wealth, they would have to pay a massive penalty, then it, then it would be practical to have the wealth tax in the UK without international cooperation.
- [05:24]
A
Yeah, it's a proposal that works if you can travel backwards in time. Yeah, you would need to create this rule and its exit tax and have it in force before anyone leaves.
- [05:36]
C
So your view is that as soon as people hear about it, because it'll have to go through some type of legislation, that's when everyone will ditch the country and go before it's enforced.
- [05:45]
A
We've seen that in California, where California has a referendum coming up this November on introducing a wealth tax, and that wealth tax is retrospective to January this year to stop people leaving. But people saw it coming and large numbers of billionaires fled California before January this year.
- [06:04]
B
I mean, because it is obviously theoretically possible under UK legislative arrangements for the moment it's announced, to say, even if the legislation hasn't gone through, even if Parliament hasn't approved it, you can announce it and say, by the way, the exit tax comes into effect this second. You can do that.
- [06:23]
A
Oh, this is the surprise tick. So Rachel Reeve stands up and says, surprise, we are introducing a wealth tax with an exit tax from right now. And in theory, you can do that. Is that permitted under human rights law? Not a straightforward question. Would a politician actually do it? What impact would that have on people's perceptions of the rule of law and stability on the UK tax system? Also somewhat unreal, because the complexity of how such attacks would work is not really coherent with. It's going to apply from now. What's applying from now? So you're having to say this thing that we haven't yet finalized or announced is applying from now. That's quite a reach.
- [07:05]
C
Also, the reality is, Robert, that you would get wind of this before it got announced and you'd say it on your show or on the ITV news, and then they'd. Because you do. You get. You find out things before they get told to us formally all the time. So you get that. You tell everyone and then they'd run off, wouldn't they?
- [07:26]
B
Yeah, I certainly would. I mean, I suppose the other question, therefore, Dan, is. I mean, the evidence is incontrovertible that these individuals pay significantly less tax than certainly, I think everybody on this podcast has a proportion of income and significantly less than many people on low incomes. And that isn't fair. So what do we do about that? Do we just sort of shrug and say, you know, there is, you know, essentially the vast majority of normal people pay their way, but there are these very special people who both own most of the world and don't have to make a contribution.
- [08:12]
A
This is what probably annoys me most about the Zachman proposal, that it combines this utopian thinking about how up tax would work with a complete lack of imagination looking at what the actual problem is. So first of all, a lot of this is about US billionaires and there's nothing that we can do to change, stop, control, regulate US billionaires. The problems of the US tax system are many and profound around we can't do anything about them. So just think about the uk. What can we do in the UK to make our tax system fairer? So for example, why is it that some very wealthy people pay a lower rate of tax? And one of the most obvious reasons is because they're paying tax the capital gains tax rate 24% and not the income tax rate of 45%. They're certainly not paying national insurance on top of that. How can we deal with that? We can equalize capital gains tax with income tax. At the same time introduce an allowance for normal return indexation relief so that you're not penalizing long term investment. Go further. Why is it that we tax working so much more than investment? The answer is because of national insurance. So what we should be looking to do is to in the long term abolish national insurance and fold it into income tax, which would be a tax cut for most working people, would be a tax increase for people living off investments. So a whole bunch of stuff you can do which requires focus on detail, requires real political, real political investment, requires the politicians to actually invest political capital in making these changes. But if you do that, you will have a fairer tax system and you can do it. Wealth tax. It's a pure talking shop.
- [09:46]
C
It really annoys me, Zuckman and also you know, Thomas Piketty who we talk a lot about in terms of looking at wealth inequality. They both argue that the, the wealth inequality can't be solved simply by tweaking capital gains. You know, they talk about asset values grow so fast rel to GDP that a direct tax on the stock of wealth is the only way to stop, you know, I guess this plutocracy that we see and this wealth inequality. But you disagree though. You think capital gains could be the way to get more equality when it comes to how much tax billionaires pay.
- [10:23]
A
I in the end, I'm not an expert in inequality, but I kind of think Zuckman and Piketty aren't either that they are obsessed with tax as an instrument of addressing inequality and about financial equal. When I read people like Angus Dayton, not the comedian, the other guy and what they write about inequality, I'm struck by how little they talk about tax. The whole of the academic inequality literature is much broader than that. It looks at education, skills, family background, geography, health, transport, labor market, political power, housing, inheritance tax, all of these other things which are critical to inequality and the problems which society faces. A wealth tax feels like simplistic cop out.
- [11:07]
C
Okay, so what about. We also had Mariana Mattucato on the show recently, who again another brilliant economist and she was talking about how actually we need to think less about redistribution, so this sense of tax, and instead think about pre distribution. So you know, looking at inequality before you get to the point where people are taxed on what they've made. Is that what you're saying then, that we need to think about that?
- [11:35]
A
This is all not my expertise, so I'm not going to say too much other than the fact that some inequality experts spend all of their time talking about tax and no time talking about the other very obvious drivers of inequality rather bugs me.
- [11:49]
B
But I think it's also important to say that we're slightly confusing two different things here. An equalization of income tax and CGT rates. And were we to see national insurance just rolled into the income tax system, all of that might well produce a fairer system. It would raise a lot more tax from people who are very well off. It would not address the sort of Zucman piketty class, the super billionaires. Right. I'm not remotely disagreeing with you. If you want to address the billionaire issue, it's a much bigger issue than just tax, as it were. And so one of the reasons we've seen the rise of these super super super super mega billionaires is because we've had this industrial revolution over the last 30 years. These digital companies, which have a sort of winner takes all element to the way that they operate. If you are Google, your network essentially becomes a monopoly and you make untold, you know, billions from that monopoly. And so there is the sort of Mariana Mazzucato pre distribution point is about how do you stop businesses essentially becoming these monopolies before they become monopolies?
- [13:11]
A
I find the way she writes about that a bit strange because Google has made a bunch of people billionaires. It's also made me way happier and more productive. And you know, my iPhone, I should be grabbing it and waving it, but I think I've lost it. That's made a bunch of people in California very wealthy, but it's also greatly enhanced my life. So there's a balance. I'm not quite sure it's being struck.
- [13:34]
B
Well, no, the Zucman piketty point, which I think millions and millions of people would agree with is that there are some sums of wealth that individuals accumulate which are just inherently too much. And they're too much for two reasons, but the fundamental one is the power that they confer. Power to influence politics in the way that Musk does, but also power that trickles down through the generations. If you're lucky enough to inherit even, I don't know, 5% of Musk's wealth, you yourself will be massively wealthy and massively powerful. It creates dynasties of, you know, a bit like the pharaohs of Egypt and people, you know. The argument is this is just bad for society to have power. You know, when you have concentrations of money on that scale, you also have concentrations of power, and that is bad for all of us.
- [14:39]
A
I completely see that. I don't. I'm going to go out on a limb and say I think Elon Musk is a bad person and has too much power. Is this a problem in the uk? Do billionaires have significant political power in the uk? To a dangerous degree. Not clear to me. That's true.
- [14:57]
B
There is a topical version of this. I mean, you pay. Money takes your choice, whether you think this is too much power or not. But a couple of billionaires, particularly operating in the crypto space, have given a lot of money to Farage and reform. That is power, right?
- [15:14]
A
Not British. They're not here.
- [15:16]
B
No, but they are interfering in. They are. Well, they are interfering in British politics and they are. They are British in the sense that they are able to make the donation, otherwise they wouldn't be able to make the donation.
- [15:29]
A
But there's nothing our tax system could do to stop that. On the other hand, we could have had a rule that said people living outside the UK can't make political donations. You could have done that. Didn't do that. A lot of the talk in this whole area is obsessed with tax, when tax is not the best lever for it.
- [15:46]
C
From the example you've given of California, what you're saying is as soon as people get wind of this, they would. They would leave and go somewhere else. But isn't that based on the assumption that all anyone cares about, all these people care about is money? Because, for example, like Piketty and Zuckman both say it's totally overblown, this flight risk element to it, because, you know, this would be rich people having to uproot their families and, and, and the UK is a great place to live. So is that. Are they just going to turn their back on the wonderful country we have here just purely to. To pay Less money elsewhere? Or is that just something it that' as an excuse when in reality it might, that might not play out like that?
- [16:27]
A
This whole will they leave thing is massively oversimplified. So let's imagine that there was a sudden tax on people called Steph. It is unlikely that many people called Steph would leave the uk. Correct. I would not have jobs, they have families, they have schools. It would take an enormous level of tax for you to leave the uk. I think there probably is a level where you, you would if it was confiscating all your assets, I suspect you would, but otherwise I don't think you would.
- [16:54]
B
And if you're listening, Rachel Reeves, I would urge you not to introduce either a Steph tax or a Robert Tax, please.
- [17:02]
A
I've heard worse proposals. A billionaire is not like you and me. They have a house in London. They probably also have houses in three, four, five different countries. They probably spend a couple of months a year here only. So leaving the UK for them is not up to routing their entire life. It is a small change in a diary. So Instead of spending 100 days here, they spend 80 days here. So really important to recognize how fragile the connection these people have with the UK actually is. And when you look at lists on seller, Sunday Times rich lists, a superficial look suggests they're all sitting there in Knightsbridge and they're really British and they're British billionaires. They're. They're really not.
- [17:42]
C
He's making them sound really shallow though.
- [17:44]
A
Don't particularly care for making them sound shallow and I'm sure they, they don't think that they're shallow, but they' their connection to the UK is a much more tenuous one than your connection or my connection.
- [17:55]
C
Right, Dan, let's hold it there for a couple of minutes and go to a quick break.
- [18:03]
E
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- [19:00]
D
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- [19:59]
C
And while we have you, Dan, obviously we've talked about Zuckman and his sidekick Piketty. The wealth tax is not the wackiest thing we've heard from Piketty recently, is it? Go on, give us your your thoughts on the latest announcement. Tell us what it is and how it works and why you hate it.
- [20:15]
A
Early June, Thomas piketty and about 40 people came out with a proposal for basically a worldwide economic revolution. They were to cap the growth of rich nations basically to nothing, cut working hours in half, cut material consumption by about 30%. 10% of all of our spending would go to other countries. Basically a multinational world government is their proposal. And again, it just strikes me as potty. There can't be anyone who thinks this is actually going to happen. Forty economists could have spent their time designing actual improvements to real world tax and economic problems, and instead they're engaging in the equivalent of fantasy football. I'm just amazed by the whole thing.
- [20:59]
B
Well, they will have their supporters, and so I'm pretty sure that what you've just said will attract a bit of attention, but I don't think you're going to get Are we going to massively push back on behalf of to my Piketty Steph?
- [21:13]
C
The only thing I would say is we've got to have people challenging the status quo, haven't we? And that's what they're doing and maybe that might be. That might resonate with lots of people who then get behind them. And you don't know what someone needs to start somewhere, don't they? And so we shouldn't dismiss people who come up with these ideas because things do need to change. Inequality is getting worse, particularly in this country. So maybe those kind of radical ideas are the ones that we should give more time to. Dan, rather than calling people potty, we
- [21:46]
A
should totally dismiss it and spend our time on useful stuff instead. I mean, it's bonkers. It contradicts itself. So it only works if you have unprecedented global cooperation electorates voting to make themselves poorer. Do you remember a few months ago tariffs were a bad thing and only lunatics imposed tariffs. So this report says that if China, the US and other countries don't accept a world government ordering permanent cuts in the living standards, then we impose tariffs on them. 180% tariffs on China, they suggest 180%.
- [22:18]
C
And then obviously China would retaliate with something equally as alarming.
- [22:21]
A
How much space does the report spend considering the consequences of these tariffs? Nothing doesn't bother. It's all very glamorous and gets you invited to cool parties and lots of funding. But how much better it would be if instead they looked at actual micro problems and how to solve them.
- [22:37]
B
Look, I've got to admit, I'm not immersed enough in the piketty proposal and your characterization of it does make it seem to me like essentially a talking point, as Steph says. But Thomas, if you are listening, come on the podcast and explain yourself.
- [22:55]
C
Excellent. Right? We should wrap things up there. Dan, as ever, thank you very much. That's it from us on the rest is money. Bye bye.
- [23:01]
B
Goodbye.
- [23:11]
D
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