The timing of Nick Clegg’s suggestion yesterday that a temporary “emergency wealth tax” should be instituted so “the rich” can help fix the economy was comical.
On Tuesday morning, the City AM newspaper revealed that a top financial sector recruitment agency in London has seen a 51% increase in French-speaking jobseekers looking to abandon France to avoid Francois Hollande’s 75% tax on high earners. As expected, the 75% tax rate will bring in 0% tax from a great many high earners who are simply taking their money elsewhere.
Like council tax, Clegg’s “wealth tax” would tax people on the value of their assets and not their income and hence ability to pay. Council tax is calculated on the value of your house in 1991 and whether you’re a millionaire or a retired couple who bought their house at the “right” time, you are expected to pay the same tax. Clegg’s “wealth tax” would apply the same flawed logic that says if you own something expensive then you must have money. It isn’t a tax on income, which can be spent, it’s a tax on the ownership of valuable things which can’t.
The suggestion that Clegg’s “wealth tax” would be temporary is as comical as his timing. Income tax is a temporary tax, introduced in 1798 to pay for the Napoleonic Wars. Once they get their hands on the money they won’t want to let go of it and we will be stuck with this unfair and counter-productive tax which is driven entirely by jealousy and political opportunism.
To fix the economy requires bold tax cuts, not ill thought out tax increases. Cut tax and put more money in people’s pockets and they will spread that money around, creating jobs and reducing the drain on the welfare state which means less tax is needed to support public spending. Big tax cuts will boost the economy and pay for themselves, big tax rises will drive the wealth creators out of the country and damage the economy.