In 1900, the wealthiest one per cent of people in Britain controlled an estimated 70 per cent of all personal wealth. By 1990, that share had fallen to under 20 per cent. It was the most sustained redistribution of wealth in British history, and it was not inevitable. It was the product of deliberate policy choices: progressive taxation, labour rights, universal public services, and democratic reform.
That settlement is now being unmade. The wealthiest one per cent of UK households again hold the same share of wealth as the entire bottom half combined. The 50 wealthiest families hold more combined wealth than 34 million people. UK billionaire wealth has grown roughly four times faster than median household wealth since 2008. We are living in a new Gilded Age, and it should trouble liberals deeply, because concentrated wealth is concentrated power, and concentrated power is the enemy of individual freedom.
This is the point that gets lost when inequality is treated as a concern only for the left. The liberal tradition, at its best, has always understood that freedom without material security is hollow, and that unchecked economic power threatens political liberty just as surely as unchecked state power. Lloyd George understood this when he introduced the People’s Budget of 1909. Beveridge understood it when he identified Want as one of the five giants to be slain. The question is whether today’s liberals are willing to apply that same logic to the new concentrations of wealth and power that define our era.
At A Just Society, we argue that they should, and we have set out a detailed programme for how. Our proposals operate across the same three domains that ended the first Gilded Age: taxation, universal provision, and democratic reform.
Limitarianism would introduce a progressive annual levy on extreme wealth: 1 per cent on fortunes between £5 and £10 million, 2 per cent up to £1 billion, and 3 per cent above that. The revenues would be earmarked for opportunity-enhancing investment: ending child poverty, a £10,000 citizens’ inheritance for young adults, care provision, and the green transition. This is not punitive redistribution. It is the principle that extreme fortunes built on shared foundations should sustain those foundations.
Universal Basic Income and Services would replace the punitive, sanctioning welfare system with an unconditional income floor and guaranteed access to essentials including energy, transport, broadband, and care. The evidence from Finland, Alaska, and the post-war welfare state itself all points the same way: security makes people more free, not less productive.
Democratic reform would break the feedback loop between wealth and political power. Proportional representation, donation caps, Lords reform, and media ownership limits are not abstract constitutional questions. They are the architecture that determines whether progressive policy can survive the inevitable counterattack from those who profit from the status quo.
Neither major party is even making the case for the structural reforms that the moment demands. A wealth tax is not on the agenda. A wealth register is not being built. Lords reform has stalled again. The benefits system still runs on sanctions. This is not a failure of one government. It is a failure of a two-party system in which both sides have accepted the basic architecture of the new Gilded Age as fixed, differing only on how to manage its symptoms. The problem is structural, and it requires structural solutions: the kind of deep institutional reform that liberals, at their boldest, have always championed.
History shows us that Gilded Ages can be ended. It also shows us that they do not end themselves. They end because people organise, argue, and build coalitions powerful enough to change the rules. The first time around, liberals were at the heart of that movement. The People’s Budget, the Parliament Acts, the foundations of the welfare state: these were liberal achievements, born of the conviction that a free society cannot tolerate the domination of the many by the few.
That conviction is needed again. The wealth is there. The evidence is there. The policies are there. What remains is the political will to act on them.
Read the full essay, with detailed historical analysis and policy proposals, at ajustsociety.uk
* Tanya Park is a Lib Dem County, Borough & Town councillor in Eastleigh, Hampshire and writes at A Just Society, a liberal policy project making the case for radical progressive policies grounded in liberal principles.
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62 Comments
“1 per cent on fortunes between £5 and £10 million, 2 per cent up to £1 billion, and 3 per cent above that. The revenues would be earmarked for opportunity-enhancing investment: ending child poverty, a £10,000 citizens’ inheritance for young adults, care provision, and the green transition”
How much might this brand of wealth tax raise? Is it sustainable year on year as (all other things being equal) people’s wealth diminishes and the wealthy remove their money from the country ?
Will the amount raised actually cover the costs of ending child poverty, a £10,000 citizens’ inheritance for young adults, care provision, and the green transition (and you have overlooked defence which needs loads of money spent on it).
More profoundly, your underlying essay points out that “that the initial shock (*) to concentrated wealth came from the destruction of capital in two world wars and the Great Depression”. Was that a necessary condition for the equalisation of society that followed? If it was, was the price in terms of blood and treasure worth paying and should we want to pay it now?
i also think you are over looking the intellectual revolution that was marxism and socialism starting in (say) 1867 as a driver. Economic models based on these have on the whole been unsuccessful and out competed as polities and economies – (show me a free, stable and productive marxist/socialist country). Liberals have been distracted by these models for far too long – with the result that we have been unable to control the power wielded by concentrated wealth you rightly point to.
“… extreme fortunes built on shared foundations should sustain those foundations.”
That is a complete justification for supporting a wealth tax in just ten words. If it does not already appear in party publications, it should.
“… extreme fortunes built on shared foundations should sustain those foundations.”
This is certainly seductive, but if the wealth tax proposed does not in fact sustain those foundations everyone will be disappointed.
Many argue for a wealth tax on the grounds that it reduces inequality which it probably does. I suggest the proper test for Liberal Democrats is whether a wealth tax can meaningfully and sustainably reduce enslavement by poverty, ignorance or conformity.
@Tristan Thank you for engaging seriously with this.
On revenue: recurrent wealth taxes don’t deplete their own base, because wealth regenerates through returns on capital. Switzerland has run cantonal wealth taxes for decades alongside a highly competitive economy. Spain’s solidarity tax raised nearly €2 billion in its first year. The full Limitarianism brief at ajustsociety.uk covers the exit levy, wealth register, and international coordination mechanisms designed to address avoidance.
On costs: Limitarianism is one funding stream within a broader fiscal architecture, not a single magic pot. No single tax funds everything, but that’s no argument against any particular tax.
On whether catastrophe was necessary: no, and that’s the whole point. The People’s Budget predated the First World War. Progressive Era reforms predated the Great Depression. The shocks accelerated change, but deliberate policy built and sustained the equal society that followed. The argument is that we should make these changes democratically rather than waiting for disaster.
On socialism: I think we agree more than you realise. You’re right that liberals have spent too long reacting to socialism rather than developing their own radical programme. That is precisely what A Just Society exists to change. These aren’t socialist proposals. Limitarianism disperses power rather than concentrating it. UBI expands individual choice. Democratic reform strengthens pluralism. Liberalism has its own radical tradition, from Lloyd George through Beveridge to Keynes, and it has been dormant too long. Your diagnosis is exactly right. This is our answer to it.
One of the worries about wealth taxes or higher taxes on wealthy people is that it encourages them to move abroad to avoid them. The USA frustrates this kind of tax avoidance by taxing people on their worldwide income as a condition of maintaining their US citizenship. Boris Johnson is one of many who “cancelled” their US citizenship to avoid US taxes. US residents of the UK have to file two tax returns but under the double-taxation treaty they only pay in the US what they haven’t already paid in the UK. Perhaps the UK should attempt to follow this example – it is probably still more attractive for most Brits to be a citizen of the UK than of Monaco, Singapore or Dubai.
@John, thanks for your comment. This is a good idea and worth serious consideration. Citizenship-based taxation is one of the strongest answers to the capital flight objection because it makes avoidance a binary choice: give up your citizenship or pay your taxes. Most people, even very wealthy ones, value their citizenship for reasons well beyond tax.
My Limitarianism proposal takes a complementary approach: a 15 per cent exit levy on unrealised gains, a mandatory wealth register, and expanded international information-exchange through the OECD. Citizenship-based taxation could strengthen this further.
The broader point is the one that matters: capital flight is a design problem with known solutions, not a fatal flaw in the case for taxing wealth. We have far more tools available than the debate usually acknowledges.
“Switzerland has run cantonal wealth taxes for decades alongside a highly competitive economy. ”
At considerably lower rates than being proposed here though if this is correct. Geneva, (considered to be the canton with the highest wealth tax rates) has a max of 1%
https://www.wealthandpolicy.com/wp/BP133_Countries_Switzerland.pdf
In my opinion this article is well-meaning nonsense.
I can think of few policies more likely to drive wealth (and the economic activity and tax revenues that wealthy people’s spending gives rise to) away from the UK.
If you want to make the British people as a whole even poorer, this is the way to do it.
For more details, see my 2012 article “Making the UK a land fit for billionaires” at the link below.
https://www.mohammedamin.com/Politics/A-land-fit-for-billionaires.html
Good article. I would just add that gross inequality is corrosive to democracy. If we care about the rise of the Right and the vilification of immigrants and anyone else seen to be “other”, we must address inequality and financial insecurity.
In response to some of the comments so far: While inequality is not necessarily the root of all evil, it certainly helps to fertile the ground
A student wish list that’s great for a pub discussion around conference time – other than that we know none of this will ever get enacted. UBI will be quietly filed away and ignored as best the party can come election time.
UBI won’t be quietly ignored because it is not party policy. What will be quietly ignored is our unfunded aspiration to raise basic Universal Credit to a level which would put most of the population on means-tested benefits.
@Mohammed
With respect, the argument that taxing wealth drives it away and leaves everyone poorer has been made confidently for over a century. It was made against Lloyd George’s People’s Budget in 1909. It was made against post-war progressive taxation. It was made against every serious attempt to address concentration. And yet the most equal and broadly prosperous period in British history was also the period of highest top tax rates.
The evidence simply does not support the claim that wealth taxation inevitably drives wealth away. What it does is require careful design, which is what the full policy proposal provides.
Respectfully, dismissing the argument as “well-meaning nonsense” while pointing to a 2012 article on attracting billionaires rather suggests we are starting from quite different assumptions about what a healthy economy looks like.
@Craig & @Peter
Craig, calling this a “student wish list,” is avoiding the substance. The question isn’t whether these ideas sound radical. It’s whether the analysis of the problem is right. If concentrated wealth is distorting democracy and entrenching inequality, then dismissing the solutions as unrealistic is effectively accepting the status quo.
Peter, you’re right that UBI isn’t current party policy, and this isn’t written as party policy. That’s exactly why I write these pieces: to make the intellectual case for structural reform so that when the political window opens, the ideas are ready and tested. But your broader point stands: if the party’s own welfare aspirations are unfunded, that’s an argument for building a serious fiscal architecture to pay for them, not for abandoning ambition altogether.
The frustration you’re both expressing is exactly what the essay diagnoses. Bold ideas get diluted, ignored, and eventually everyone decides that structural reform is unrealistic. Meanwhile, the architecture of inequality stays intact. At some point, we have to decide whether we’re serious about changing it.
Correct me if I’m wrong but Lib Dem Party policy is for a guaranteed basic income rather than a universal basic income.
If you ask anyone outside the political bubble the chances are they won’t know what either of these terms mean. They may well think a GBI is about higher minimum wages. If you explain what a UBI is they will likely be incredulous that anyone can be serious about such a policy.
The problem, even if they are correctly understood, is that these are social benefits paid for by the taxpayer and everyone will know what both will mean to their tax bill. The leadership of the Lib Dems knows this which is why they aren’t keen, to say the least, about pushing either concept at election time.
Some of the larger employers of the lower paid would possibly be an exception. It suits them quite nicely that their workers won’t be too militant about pushing for higher wages if they know that most of any pay increase is likely to be offset by a combination of higher taxes and a reduction in social benefits.
@Peter You’re right that party policy is GBI rather than UBI, and that’s a distinction worth taking seriously. The two work quite differently and I’d argue the party chose the weaker option, but that’s a longer debate.
On public understanding: yes, most people don’t know what either term means. But most people didn’t know what “national insurance” meant in 1911 either, and plenty still don’t really understand what it is today. That hasn’t stopped it being one of the foundations of the welfare state. The task is communication, not retreat. If we only advocate policies that poll well before they’re explained, we’d never propose anything worth having.
On cost: every policy has a cost, and every policy has a counterfactual. The current system costs billions in administrative complexity, sanctions bureaucracy, and the economic damage of keeping people in insecurity. The question isn’t whether a basic income costs money. It’s whether the current arrangement costs more in ways we’ve stopped noticing.
Your point about employers is interesting, because you’ve actually identified the strongest argument for universality over means-testing. The clawback problem you describe, where pay rises are offset by benefit withdrawal and higher taxes, is exactly what happens under means-tested systems like Universal Credit and GBI. That’s the effective marginal tax rate trap. A genuine UBI doesn’t withdraw as earnings rise in the same way, which is precisely why it gives workers more bargaining power, not less. The system you’re criticising is the means-tested one, not the universal one.
@Tanya
“The evidence simply does not support the claim that wealth taxation inevitably drives wealth away”
With respect- it does. I work in this industry – we see the internationally mobile wealthy making decisions about where in the world to live and run businesses, and countries (other than the likes of North Korea) compete to attract that wealth. Clients ask for advice about taxation regimes as a matter of course; and the content of that advice is significant in the decision making process.
I suspect this is issue is much greater than it was historically because both capital and people are far more mobile than historically.
Capital controls (aka exit levy?) may trap some capital here but you can be sure little more international money will arrive once they have been imposed without a particular reason for investment in the UK.
Taxation on worldwide income is well worth thinking about but without double taxation treaties on sensible terms (of which the UK already has many) may well be a disincentive to inward investment.
The proposals were initially presented as providing funding for “child poverty, a £10,000 citizens’ inheritance for young adults, care provision, and the green transition” and then we discover “Limitarianism is one funding stream”. It does seem you are in fact suggesting good old fashioned tax and spend – albeit with highly desirable aims. But those are 20th century solutions for the 21st centaury world.
There’s absolutely no way you’re going to be able to avoid means testing. Even if you go down the UBI route and imagine you’ll give everyone enough money to live at a basic level, you’ll quickly run into the problem that different people have different needs: A person living at home in their parents house probably doesn’t need money to pay rent, but someone renting privately does. Some people have illnesses or disabilities that impose extra costs. Some people have care needs. And so on. If you want to support all those people adequately then you have no choice but to ask about people’s individual circumstances and pay out according to what they tell you (which immediately also brings out a whole set of bureaucracy and enforcement issues around looking out for people who lie in order to be given more money). That is an inevitable part of any workable system.
The issue of pay rises getting offset is also unavoidable in any reasonably generous welfare system. Even if you go for UBI, the only way to finance it is through much higher taxes. And that means anyone who gets a pay rise immediately loses a large part of their pay rise through the high taxes.
These are fundamental problems of any reasonably generous welfare system. I think if you want a generous welfare system, be it through GBI or UBI or anything else, you have to be honest and realistic that this will be a consequence.
@Craig. UBI should be on every student wish list. Students are one of the major groups that would benefit. Under the standard definition based on income, they are generally in destitution or deep poverty but study is considered a less deserving way of advancing your career than applying for hundreds of jobs you are not qualified for.
Tristan, I take the point about capital mobility seriously and wouldn’t dismiss your professional experience behind it. Wealthy clients do factor taxation into residency decisions.
But “factor into decisions” is not the same as “inevitably drives wealth away.” Switzerland has taxed wealth for decades. Spain’s solidarity tax raised nearly €2 billion in year one. Norway taxes wealth annually. These are open economies competing in the same global market your clients navigate. The question is design, not whether it can be done at all.
It’s also worth remembering what a 1% levy above £5 million actually means. Capital at that level typically generates returns of 4-5% annually. A 1% levy doesn’t reduce anyone’s wealth. It slows the rate at which very large fortunes compound. You’re still getting richer. Just not quite as fast.
On the exit levy: a crystallisation event triggered by a change of tax residence is not a capital control. Comparable provisions already exist in US and Canadian tax law. Inward investment is driven by market access, infrastructure, legal frameworks, and talent, not a 1% levy on wealth above £5 million.
On “20th century solutions”: taxation funding public provision isn’t a century-specific idea. It’s how every state funds public goods. The question is who pays and what for. If the alternative is hoping concentrated wealth trickles down without intervention, we have forty years of evidence on how that works out.
“In 1900, the wealthiest one per cent of people in Britain controlled an estimated 70 per cent of all personal wealth. By 1990, that share had fallen to under 20 per cent. ”
Good news. They currently own about 10% according to the ONS. “in the April 2020 to March 2022 period, the wealthiest 1% of households held 10% of all household wealth in Great Britain,” https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/totalwealthingreatbritain/april2020tomarch2022
@Simon, you’re raising real design questions, but I think you’re conflating two different things.
Means-testing is assessing someone’s income to determine whether they are eligible for support. A needs assessment recognises that some people face additional costs, such as disability or caring responsibilities. UBI replaces the first, not the second. Nobody is proposing that everyone gets identical support regardless of circumstance. The basic income floor would be universal and unconditional, with additional provisions layered on top for those who need it. That’s how the NHS works: everyone gets access, and people with greater needs get more treatment. Nobody calls that means-testing.
On pay rises: there’s a crucial difference between losing a portion of a pay rise through income tax, which we all accept as normal, and losing 70-80% through the simultaneous withdrawal of multiple means-tested benefits. The first is progressive taxation. The second is a poverty trap. UBI eliminates the second because the floor doesn’t withdraw as you earn more. You still pay tax on earnings, but you don’t face the cliff edges that make it economically irrational for people on Universal Credit to take on extra hours.
Your final point, that these problems are inevitable in any generous welfare system, is precisely the assumption my essay challenges. The post-war welfare state was generous and broadly popular because universality built political legitimacy. The problems you describe aren’t features of generosity. They’re features of conditionality.
@Simon McGrath: Thanks for the source. The ONS household wealth figure and the long-run personal wealth estimates from Piketty and Atkinson aren’t directly comparable, as my longer-form essay acknowledges. Including pensions and property in household wealth compresses the top share significantly. Exclude them, and the concentration looks very different. But the essay makes this point: the top 1% holding the same share as the entire bottom 50% combined, alongside the explosion in billionaire wealth, tells you where the concentration is happening. The broad picture has improved since 1900. The very top has pulled away dramatically since 1990. Both things are true, and the second is the problem.
The best route out of poverty – and always will be – is being brought up in a stable two parent tight knit family. That’s why Asian families do so well in school , & the Ugandan Asians who arrived with nothing have been so successful through the generations. Lord Sewell’s report some years ago highlighted this.
@Craig, the suggestion that family structure is the primary route out of poverty doesn’t survive contact with the evidence. The majority of children in poverty in the UK live in two-parent households. Most live in families where at least one parent works. They’re not poor because of family breakdown. They’re poor because wages are too low, housing costs are too high, and the social security system is designed to punish rather than support.
The success of Ugandan Asian families is real and worth celebrating, but attributing it primarily to family structure rather than strong community networks, entrepreneurial traditions, and the fact that they were granted full residency rights from day one is exactly the kind of cultural explanation that lets structural failures off the hook. Their story actually reinforces the argument: give people security and permanent status, and they thrive.
Poverty is not a character flaw or a lifestyle choice. It is a policy outcome. And it requires policy solutions.
Actually, if you were able to do anything about it, having two rich parents is the best way out of poverty.
We forget the Ugandan Asians, weren’t born and raised in poverty. They came with expectations that were very similar to the “Protestant work ethic”.
We also need to modify our understanding of “Asian families”, looking at the evidence from Australia and elsewhere, in general we can expect new immigrants and their offspring to be the most motivated, however, once you get to the second and third generations the difference between their work attitudes isn’t too dissimilar to the long-term resident population.
As for the “ The best route out of poverty – and always will be – is being brought up in a stable two parent tight knit family.” I would disagree, because on the sink/extreme depredation estates, I’ve had dealings with, there are strong tight-knit families, unfortunately the world is stacked against their children getting out of the environment they have been brought up in. The only hard evidence I’ve seen is the work dating back to the 1960s on education and social networking, that’s does provide clear indications on how outcomes could be improved.
@Tanya: I grew up in a one-parent family, and yes we were poor. And it was very obvious that being a one-parent family was a huge part of the reason why we were poor. More recently I can think of a few people I know personally who are poor and living on benefits, and where that appears to be a direct result of their own lifestyle choices (which they could change but they choose not to). So while you’re right that poverty is often structural and can be alleviated by Government action, it’s a mistake to dismiss family structure/etc. completely as a source of poverty. The true picture is certainly going to be a combination.
It seems a bit strange to say that our social security system is designed to punish. If I wanted to design a social security system to punish people, then the obvious way to do that would be to not have any benefits at all. Yet the Government spends £many billions paying benefits to people. It might well be that that system doesn’t support people enough but claiming it’s not designed to support people at all doesn’t really match the evidence of the amounts spent – umm – supporting people!
Tanya,
I’d have to see some figures before totally accepting your point. That’s always the tricky bit. The more effective the system the more severe the taper has to be to make the numbers add up.
I would expect that the overall taper (including both benefit reduction and additional taxation) would have to be about the same for both a GBI and UBI for any given degree of effectiveness in terms of poverty reduction. I understand there won’t be any benefit reduction with a UBI but there will be a greater taxation increase. A progressive system of taxation does have an inbuilt ‘means testing’ mechanism.
Some 65% of children in poverty live in households with one adult in full time work. From a slightly more leftish POV it’s always made more sense to say that this is because the adults aren’t paid enough rather than it’s because their taxpayer funded benefits are too low. It’s fair enough for Lib Dems to argue for higher social benefits, of course, but making the case for higher wages wouldn’t do any harm either.
I don’t see many on here arguing for increases in minimum wages to make them into living wages.
“Most [children in poverty] live in families where at least one parent works” but a disproportionate number live in families where only one parent works. Because of the way Universal Credit works, one minimum wage adds little to the net income of a family with children. Adding a second has a far bigger impact.
I strongly support the aims but I’m sceptical of the method. Annual wealth levies are an administrative nightmare. Valuing illiquid assets like private businesses annually is very difficult (France’s wealth tax drowned in disputes) and forcing people to pay tax on unrealised gains creates liquidity crises that inhibit growth. The risks of capital flight, while often overstated, are real. Sweden, France, and Norway all lost significant capital and eventually abandoned or weakened their wealth taxes.
It’s more practical and politically astute to tax wealth when it moves or generates returns. Equalise capital gains tax with income tax rates and close the inheritance tax loopholes that let generational wealth escape taxation entirely. Implement progressive property taxation on high-value homes and equalise dividend taxation with employment income.
These reforms would raise substantially more revenue than an annual wealth levy while being far easier to implement and harder to avoid. Sometimes the pragmatic path is also the transformative one.
@Tanya excellent article that has stimulate a very good discussion
@ Tristan. ” Taxation on worldwide income is well worth thinking about but without double taxation treaties on sensible terms (of which the UK already has many) may well be a disincentive to inward investment.”
The UK does actually have double taxation treaties with over 130 countries around the world.
@Andrew This is a really constructive challenge and I appreciate the good faith behind it.
You’re right that France’s ISF was badly designed and generated costly valuation disputes. But the lesson from France is about design, not about the principle. Switzerland’s cantonal wealth taxes have operated for decades without the same problems, largely because they use simplified valuation methods and integrate with existing reporting. Spain’s solidarity tax raised nearly €2 billion in its first year. Not every wealth tax is France’s wealth tax.
On your alternative proposals: I agree with most of them. Equalising capital gains with income tax, closing inheritance tax loopholes, progressive property taxation, and dividend equalisation are all good policy. Several feature in the broader A Just Society platform. But I’d argue they complement an annual levy rather than replace it. Transaction-based taxes only bite when wealth moves. The problem with extreme concentration is that much of it doesn’t move. It sits, compounds, and generates political power. An annual levy addresses the stock of wealth, not just the flow.
You may be right that the pragmatic path gets further faster. But I’d rather build the architecture for both and let politics determine the sequencing than concede the principle before the argument is even had.
Tanya; …Sewell’s reporting 2021 highlighted the the biggest driver of outcomes was the family unit. Sewell was a teacher of 30+ years in some of London’s toughest schools. That’s why Asian families do so well – strong educational and work ethic . To ignore Family breakdown goes against so many studies.
Peter D…”Under the standard definition based on income, they are generally in destitution or deep poverty” ….
If that’s the case the definition is utter drivel.
@Tanya “Transaction-based taxes only bite when wealth moves” As you pointed out yourself “Capital at that level typically generates returns of 4-5% annually” therefore a 20-25% tax on investment returns would be roughly equivalent to a 1% tax on capital and much easier to assess. It also has the advantage of being naturally progressive since higher wealth usually produces higher returns. The downside is political. Raising the top rate of tax to 65% sounds a lot more radical than a 1% wealth tax.
@Peter D The revenue arithmetic is fair, and a higher tax on investment returns would certainly raise money. But it wouldn’t address the same problem. Taxing returns captures income from wealth. An annual levy on the stock of wealth addresses the concentration itself, and it’s the concentration that distorts democracy, captures policy, and entrenches structural inequality.
Someone holding £2 billion in assets generating modest returns still wields enormous political and economic power regardless of what they earn in a given year. Taxing their returns doesn’t touch that. Taxing the stock does.
There’s also a practical gap: much extreme wealth appreciates without generating taxable income until assets are sold. A returns-based tax misses wealth that simply sits and compounds in value. An annual levy doesn’t.
And you’ve made the political case for the wealth tax framing better than I did. A 1% levy on fortunes above £5 million is exactly what it sounds like. The equivalent achieved through income tax would require rates that sound far more radical while doing less to address the underlying concentration. Sometimes the direct route is both the more honest and the more saleable one.
There aren’t many people holding £2 billion in assets generating modest returns. As you say, those returns are often in the form of unrealised capital growth but if you can assess the capital value each year, you can assess the capital gain each year and tax it.
@Peter D Fair point on the logic: if you can value assets for a levy, you can also calculate unrealised gains. But there’s a practical difference. A 1% levy on the stock is predictable and stable. A tax on annual unrealised gains is volatile because gains fluctuate enormously year to year. In a down market, you’d collect nothing while the underlying concentration remains untouched.
There’s also a deeper distinction. A wealth levy says this level of concentration is itself the problem. A gains tax says we’ll take a cut when your wealth grows. The first addresses the stock of power. The second only catches the flow. Both have a place, but they’re not doing the same work.
The thing that worries me about wealth taxes is they effectively amount to confiscating people’s property. If someone has £1Bn wealth and has acquired it legitimately then, almost certainly they have already paid substantial taxes (on income) as they acquired that wealth. And much as we might feel envious of their wealth and worried about inequality, if they’ve already paid tax to acquire that wealth, then to me it doesn’t feel right to be going back to them and taking away a bit more of their wealth each year. (If on the other hand they didn’t pay substantial taxes when they acquired their wealth, that would indicate a flaw in the way we tax income that needs addressing.)
@Tanya, you point out in your first paragraph that between 1900 and 1990 concentrations of wealth dramatically fell. Well that happened in the complete absence of wealth taxes – as far as I’m aware the UK never taxed wealth during that period. Perhaps we should be looking to see how that happened and what lessons we can learn from that.
@ Simon,
” if they’ve already paid tax to acquire that wealth……”
LibDems, or at least Liberals, at one time were extremely radical on the issue of land ownership. Not so much now though!
Who paid to acquire the land in the first place? Who would they have paid it to? God? I doubt if William the Conqueror and his associates paid anything including any taxes to anyone! Many wealthy families, in the UK, can thank a Norman ancestor for their good fortune.
Are you saying they have acquired their wealth legitimately or illegitimately?
“A 1% levy on the stock is predictable and stable. A tax on annual unrealised gains is volatile because gains fluctuate enormously year to year. In a down market, you’d collect nothing while the underlying concentration remains untouched.” I would call that Keynsian negative feedback. putting money into the economy in bad years and taking it out in good ones.
@Simon R The “already paid tax” argument sounds intuitive but we already tax wealth annually. Council tax is a levy on property. Business rates are a levy on commercial property. Nobody calls those confiscation. The principle is well established. We just don’t currently apply it to financial wealth, which is a political choice, not a moral one.
It’s also worth questioning the premise. Much extreme wealth derives from asset appreciation that has never been taxed because it remains unrealised. Inherited wealth frequently passes through structures designed to minimise tax liability. The assumption that the tax system has already taken its fair share at the very top is, unfortunately, not borne out by the evidence.
On the historical point: the UK didn’t have an annual wealth tax between 1900 and 1990, but it absolutely taxed wealth through other mechanisms. Estate duty and later capital transfer tax hit inherited wealth hard. Top marginal income tax rates exceeded 90%. Capital gains tax arrived in 1965. The compression you rightly celebrate didn’t happen in the absence of taxing wealth. It happened because wealth was taxed aggressively through multiple channels. That’s precisely the lesson we should learn from it.
@Peter D That’s a clever reframing, and in purely macroeconomic terms, there’s something to it. But the purpose of a wealth levy isn’t counter-cyclical stabilisation. It’s funding predictable universal services and addressing the structural concentration of power. You can’t run a basic income on revenue that swings with market cycles. And in a prolonged downturn, which is precisely when people need those services most, you’d be collecting the least.
@ Tanya,
I’d say PeterD has it right with his “Keynsian negative feedback. putting money into the economy in bad years and taking it out in good ones” comment. Whereas you seem to be treating the macroeconomy as a household, and getting it the wrong way around, with your “in a prolonged downturn, which is precisely when people need those services most, you’d be collecting the least.”
Many people do get it the wrong way around. When tax receipts are unexpectedly high, it is a sign that the economy is potentially running slightly too hot. It doesn’t mean that Government has more money to spend. Government should take a look at the bigger picture and think about taxing more and/or spending less.
Conversely when tax receipts are lower than expected and the economy looks sluggish……..
Of course PeterD and myself are talking about a more sensible way to run the economy. The current vogue is to try to do it all via interest rate adjustments.
@Peter Martin: Yes I agree. Probably all land, if you back far enough in history, was acquired by means that we would today regard as illegitimate – but in the UK, that was usually so long ago that it’s pointless today worrying about it. And you would hope that people who today that land would have paid inheritance tax when they received it.
Actually my views on land are pretty radical – I’m somewhat dubious about the whole concept of individuals owning land – I think land is a very special case compared to other kinds of property because of the way it is fixed, cannot be created or moved, and anything you to a piece of land tends to impact the whole community. But that’s a whole separate discussion for another article.
@Peter Martin I’m familiar with counter-cyclical fiscal policy, and nothing in my argument contradicts it. Governments can and should spend more in downturns. That’s not in dispute.
My point is different: universal services need a stable, visible funding base to survive politically. Not because the Treasury literally runs out of money in a recession, but because programmes without identifiable revenue streams are the first to be cut when the political mood shifts. That’s not a theoretical concern. It’s what happened across the 2010s.
A wealth levy on the stock provides that stability because extreme wealth doesn’t evaporate in a downturn the way income or returns do. Counter-cyclical borrowing manages the fluctuations around it. The two work together. Treating the levy as though it needs to function as an automatic stabiliser misreads what it’s for.
I think Tanya Park has scratched an itch in the Liberal Democrats that has long been their for some time for some serious politics . but she is not alone noted Lloyd George , Beverage , Keynes and Jenkins are coming back in to fashion . With a general election some distance away now is the right time to have that conversation.
@ Simon,
Yes we might hope on the question of inheritance taxes which as a form of fixed wealth tax. So we actually have had wealth taxes. The first step might be to think of better ways to ensure they aren’t dodged.
We’ve seen the hoo-ha when this govt has suggested making minor alterations to the way these are applied to agricultural land. It’s going to be politically difficult.
The good duke, below, did once say that the best way to be rich is to ensure you have a wealthy Norman ancestor. This how Google replied when I asked about payment of taxation.
“The Duke of Westminster generally does not pay the standard 40% UK inheritance tax on the vast majority of the family’s multibillion-pound fortune. The assets are held in complex, long-standing trusts rather than as personal property, which allows the estate to legally avoid traditional death duties.”
@ Tanya,
I’m fully in agreement with your idea that we should have meaningful wealth taxes. You’re right that many social projects will be first in line to be cut back when the economy is in recession. Govts, though, do understand that they do need to revitalise the economy at times. The snag is they think that schemes like “cash for clunkers” is the best way to do it.
Estate duty, capital transfer tax and more recently inheritance tax were/are levied when property changes hands: In other words they are paid when someone gains wealth. That’s more analogous to income and similar taxes, all of which are paid when you receive wealth. And it’s not at all like an actual wealth tax where the Government takes part of what you own (your wealth) and then the next year the Government comes back and takes another part of that same wealth and so on. So @Tanya (and @Peter) I stand by saying we didn’t really have wealth taxes 🙂
Council tax – in some ways, yes, that works like a property-wealth tax. But the amounts are small (£thousands, not £millions), and you can very roughly see it as reasonable payment for the services that the council provides to you and your property by virtue of your living in the area. (I don’t want to totally defend it though: Council tax and business rates both badly need reform).
Where people have gained wealth without paying any tax, that would normally indicate loopholes we need to remove in existing taxes, not the need for a wealth tax.
Council tax is payed by people who own nothing. It has more in common with the poll tax originally proposed than a wealth tax or even a resource tax like LVT.
Council Tax and business rates should definitely be reformed. My own feeling is that they should be replaced with a modest LVT, which granted in many cases would be de facto passed on to the tenants, but even a revenue-neutral replacement would have benefits, primarily that the tax would still be owed on vacant properties which would, one presumes, encourage bringing empty homes and units back into productive use.
@ Tanya,
The argument for a wealth tax is often misunderstood in economic terms. The reason for any taxation isn’t to provide the government with money. It is to stop us spending it and so consuming resources which can then be transferred to government and allow spending to occur without creating inflation.
So how much spending will a wealth tax reduce? Many MMTers would say “not much” which is why they generally oppose the idea. I’d say it would be more than they allow for. The wealthy don’t just park their money in government bonds they ‘invest’ in land, real estate, and the stock market. This forces up prices and particularly causes problems for the young in the housing market.
We need to come up with an answer. I’d say it won’t be as much as some on the left would claim. It’s not going to be the 1:1 you’d expect with a tax like VAT. But it’s going to be more than some economists would claim.
The main argument for a wealth tax is reduce inequality. I don’t have a problem with that!
@ Simon,
It’s possible to take different views on whether inheritance taxes are wealth taxes. If they are considered a “death duties” then they conceivably are but if they are considered as income for the next generation then maybe not.
Whatever they are we do need to think of ways to make them more effective. I’d always prefer to be taxed after I’ve passed on than while I was still alive! If everyone had to start life with nothing and end with nothing would that be a real problem to most of us?
Whatever we achieved would then be by our own efforts. This is the case anyway for most of us.
The UK economy depends on a number of industries employing highly paid staff — investment banking, finance, insurance, commodities trading, advertising, project management, film, TV and music production, Premier League football, Formula 1 design and engineering, etc. The UK is the world’s second largest exporter of services which now generates much of the nation’s wealth. Consequently, Income Tax is highly skewed with over 28% being paid by the top 1% of earners and over 60% by the top 10% (over £65,000pa). Even if only a small proportion of those high earners were driven out by the imposition of a wealth tax it would have a catastrophic effect on tax revenue.
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Wealth taxes have caused much damage to economies wherever they’ve been tried with the notable exception of Switzerland (where it’s the only non-avoidable tax on wealth and is levied at low rates). The extremely high rates advocated here would devastate the UK economy. For many, it would be a confiscatory tax and so open to challenge under the ECHR as with the Netherland’s wealth tax…
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‘The Netherlands stung savers with 100pc tax rates – and now owes them billions’ [2024]:
https://archive.is/fcNxV
@Peter Martin You’re right that wealthy asset accumulation inflates property and stock prices, and that this is a real and underappreciated harm, particularly in housing. That’s one of the strongest practical arguments for taxing the stock of wealth rather than just the income from it.
On the broader framing: I’d respectfully part company with the view that taxation doesn’t fund government spending. That’s a specific macroeconomic perspective, not a settled consensus, and it isn’t how the fiscal architecture I’m proposing is designed. The wealth levy is built to provide a stable, identifiable revenue base for universal services, precisely because political durability requires visible funding commitments, not just macroeconomic headroom.
But we clearly agree on the destination: reducing concentration is a good in itself. I’ll take that common ground.
@Jeff A wealth tax isn’t an income tax. A 1% levy on wealth above £5 million doesn’t touch anyone earning £65,000 or affect income tax bills. The two instruments address different problems.
On the Netherlands: the Dutch “Box 3” system taxed savings based on a fictional assumed return. If the government deemed you’d earned 5.5% but your actual return was negative, you still paid tax on the fictional gain. The Supreme Court rightly ruled that taxing people on income they never received violated the ECHR. That’s a problem with taxing imaginary income, not with taxing wealth. A direct levy on the stock of wealth doesn’t assume any return. Switzerland has operated exactly this kind of levy for decades without ECHR challenge.
On capital flight: I’ve addressed this in several replies above. The short version is that a 1% levy is less than the typical annual return on capital at that level. Nobody gets poorer. They compound slightly less fast.
@Simon R The distinction between transfer taxes and stock taxes is fair, and I’ll grant you it on its own terms. Inheritance tax and CGT tax wealth when it moves, not while it sits. They’re not annual wealth taxes.
But that’s precisely the problem. Wealth that doesn’t move doesn’t get taxed. And extreme wealth is very good at not moving. Unrealised gains compound indefinitely. Inheritance tax is paid on barely a third of estates above the threshold once reliefs and structures are applied. The effective rate on the largest fortunes is far lower than the headline rate suggests. The transfer-based system you’re describing doesn’t just have loopholes — it has a structural gap. It cannot reach wealth that sits, compounds, and generates power without ever changing hands.
You’re right that closing loopholes would help. But even a perfectly enforced transfer tax only bites at the point of transaction. An annual levy addresses the concentration itself, year on year. That’s not the same job, and one can’t substitute for the other.
@ Tanya,
” I’d respectfully part company with the view that taxation doesn’t fund government spending”
Thanks for being respectful, but I didn’t actually put it that way. I try to avoid the phrase you’ve used. Not that it’s incorrect, strictly speaking, but rather it gives the wrong impression. Taxation does *enable* government spending.
No taxation = worthless currency = no meaningful government spending.
The problem with MMT is not that it’s wrong. There is a real MMT which is fine as far as I can make out. But there’s a parallel ‘pop’ or ‘on-line’ version which often isn’t right but is supported by many MMT followers. Both protagonists and their adversaries end up in serious disagreement about an incorrect version.
I’d say Bill Mitchell usually has it right!
Many on line MMTers would get this quiz question wrong!
Widening the tax base provides the government with more capacity to spend? True or False?
https://billmitchell.org/blog/?p=51079
Tanya Park 20th Feb ’26 – 7:51pm:
@Jeff A wealth tax isn’t an income tax.
I didn’t say it was. My key point is that the wealthiest people in the UK typically pay the most Income Tax. For example, billionaire Sir Jim Ratcliffe is reported to have paid £110.5 million in 2017-18. The high taxes in the UK drove him away, so now that £110.5 million is no longer paid to HMRC. So, if yet more wealthy people are driven out by imposing a wealth tax much less Income Tax would be paid (see Norway’s wealth tax disaster for an example.)
Economics isn’t just about what’s seen and happens, it’s also about what’s unseen and doesn’t happen — with a wealth tax or the threat of one being brought in, wealthy people like, for example, EasyJet founder Sir Stelios Haji-Ioannou, would likely no longer come to the UK to start businesses.
That’s a problem with taxing imaginary income, not with taxing wealth.
For many business owners a wealth tax would be taxing imaginary income. For example, most technology companies don’t pay dividends so founders would likely have to sell shares to pay it depriving them of growth capital.
@Peter Martin Fair point on the framing, and thanks for the clarification. I think we’re closer than the exchange suggested. The wealth levy is designed to create fiscal space for universal services, and if “enables spending” is more precise than “funds spending,” I can live with that. The important thing is that the capacity exists and the political architecture is durable. I suspect we agree on that even if we’d describe the mechanics slightly differently.
@Jeff Ratcliffe left the UK to avoid existing taxes, not a wealth tax. He moved to Monaco to escape income tax, dividend tax, and capital gains tax that were already in place. That’s an argument for better exit provisions, not against taxing wealth. The Limitarianism proposal includes a 15% exit levy on unrealised gains for precisely this reason.
On Norway: the picture is more complicated than “disaster.” Revenue from wealth and ownership taxes actually rose from 38 billion kroner in 2021 to 65 billion in 2025, despite the emigration. The departures were driven substantially by simultaneous hikes to dividend tax and CGT, not the wealth tax alone, and they exploited a gap between announcement and implementation that Norway has since closed with tighter exit provisions. Design matters enormously, which is why the full proposal addresses these mechanisms in detail.
On business founders and liquidity: this is a fair concern. The proposal includes deferral provisions for illiquid assets such as founder stakes in private companies, precisely because forcing share sales to pay a levy would be counterproductive. The goal is to address the concentration of wealth, not to undermine the businesses that create it.
On the Netherlands: as I explained in my previous reply, that case concerned taxation on fictional deemed returns, not an annual wealth levy. The two are fundamentally different instruments.
Tanya Park 17th Feb ’26 – 2:49pm:
Switzerland has run cantonal wealth taxes for decades alongside a highly competitive economy.
Switzerland is indeed highly competitive and is fourth in the International Tax Competitiveness Index (the UK is down at 32 out of 38 and that’s before the big tax rises in Labour’s last budget).
Like other (non-oil) rich countries Switzerland has grown wealthy by having moderate rates of tax on income and low or no taxes on wealth creation and retention. Taxes vary greatly between cantons which compete to keep taxes down and government efficiency up. The Canton of Zug has the lowest combined top income tax rate at 22%. In Geneva it’s double that. There’s no capital gains tax or inheritance tax for descendants (non at all in three cantons).
Switzerland’s wealth tax is relatively low, self-reporting, not applied to all assets or at current values and varies greatly by canton (many compete to attract high net worth residents). The Canton of Nidwald(en) has the lowest with a flat rate of 0.025% (not a typo) and Geneva and Vaud have the highest with progressive rates to nearly 1.0%.
Tanya Park 20th Feb ’26 – 7:51pm:
Switzerland has operated exactly this kind of levy for decades…
Not exactly. Swiss residents can choose a low tax rate simply by moving cantons. This article doesn’t propose such devolution of taxation powers nor does it advocate abolishing CGT or Inheritance Tax.
An unequal society affects us all so it should be included in an index of national wellbeing.