Wealth Tax

This week's Liberal Democrat conference in Brighton has seen renewed calls for a wealth tax.

Supporters of this idea argue that it is fairer than taxes on income, as it would tax wealth already accrued and so would not damage economic growth; that it would encourage better use of assets; and that it would reduce the tax burden on those with lower incomes, which would help to stimulate growth.

But the counter-arguments are powerful.  A wealth tax could see 'capital flight', where mobile and high-earning individuals move to a more benign regime.  There is some evidence that this has happened in France.  It could be hard to identify and value assets, and the wealthy tend to find ways to avoid punitive taxes - a key argument against excessive rates of income tax.

But I think there are more fundamental objections.  The savings and investments which an individual makes are purchased with money that has already been taxed.  And in this country we have always recoiled at the idea of asset confiscation by the State - which is why inheritance tax is so unpopular, and why we have never had a wealth tax.

There is one argument which merits consideration.  House price inflation has arbitrarily increased the value of assets.  The average house price in the South East is now £280,000, yet the highest band for council tax is for properties valued above £300,000.

So someone owning a property worth £3 million - ten times the local average - is paying the same amount of council tax as someone in an average home.  That doesn't seem fair, and there might be a case for a higher band for the most expensive houses.

But overall I am uncomfortable about all this talk of new taxes.  Britain's tax burden is already at a record high.  The State is now spending at a rate of nearly half our national output - a higher level than at time since the War. 

I believe we need far more focus on how businesses can be freed to be successful and public money spent more wisely.  Our country should be talking about wealth creation, not wealth confiscation, and about how to foster enterprise, not how to fleece entrepreneurs.