It's time to explode the Establishment myths against a wealth tax

The Herald Scotland

2 hours ago

This rebuttal largely goes unchallenged by the national media, yet it has at its heart a number of misleading premises.
The first is that wealth creation ceases when the wealthy leave. This stems from the myth that the ruling class create wealth through their ingenuity and risk-taking, as opposed to all financial wealth originating from human labour. It would therefore take a mass exodus or nationwide risk to life for wealth creation in a country to cease – we need only look at the hit private profit would have taken during the pandemic had the state not stepped in to shore it up to see the primacy of human labour evidenced.
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The second is that existing wealth itself is mobile and can "leave" with the wealthy. Some wealth is, of course, mobile, in the form of fine art, precious gems, other luxury items and the king of capital; cash, which is exactly why currency controls and export restrictions and limits exist. However, a significant proportion of wealth is in immobile assets like land, property and British-based businesses whose wealth is generated by, you guessed it, human labour. This wealth cannot up sticks and leave with an individual. The resources remain in the country and are subject to taxation.
The third is the Laffer Curve itself which purports to visualise the relationship between tax rates and tax revenue, the idea being that there is an optimum rate of tax which raises the maximum revenue, above which revenue starts to decrease as taxpayers are deterred from remaining in the tax system. This theory, though influential, is unfounded.
The concept of trickle-down economics, that tax cuts raise more revenue by encouraging investment and thus benefit society, has not been borne out in data. Tax cuts have not been found to reduce inequality. UK taxes are considerably lower than in most other western European countries, yet we face significant and persistent income and wealth inequalities. Research from the Joseph Rowntree Foundation found that in the UK the top 10% own a staggering 57% of the wealth, while 2 in every 10 adults and 3 in every 10 children, are in poverty.
So, if wealth creation doesn't stop when the already wealthy leave, if the super-rich can't take their British resource-dependent wealth with them, and if tax cuts have not been found to reduce inequality, why is the Establishment so opposed to taxing wealth?
The other half of their argument is on what may happen in future. Their fear, they say, is that if we make the country less profitable for wealthy individuals, even slightly so through a modest wealth tax, they will leave, and private interest as a whole will be less likely to invest in our economy.
How likely this is has been contested by organisations like Tax Justice UK and Patriotic Millionaires UK, so it seems likely that at least some of the millionaires will stay, but regardless the important question is: what do the rest of us stand to gain from any potential risk of flight?
We know that waiting for wealth to trickle down has not worked, that inequality has remained high while the rich get richer.
We know we won't lose wealth creation as long as we have a fit and able population to do the work.
We know we won't lose all existing wealth as long as we have natural resources, built heritage and, yes, a fit and able population to do the work.
In fact, the greatest risk to wealth is workforce shortages caused by a public health service on its knees, an undervalued public education system and a cost-of-living crisis deterring new parents. In short, the greatest risk to wealth is continuing to let it go untaxed.
Inequality has remained high while the rich get richer (Image: Getty)
Yes, we may lose some wealthy individuals who don't want to pay their fair share, we may see fewer corporate lobbyists on their payroll and fewer freebies for the politicians in their pockets – I'll shed no tears for them – but what we stand to gain is a fairer system.
A system that addresses inequality and says clearly and proudly, if your private interest has benefitted from our public services: our health, our education, our labour (in every sense!), you will contribute a proportion of that benefit back into the system.
There would be no wealth without us, all we are asking is that we all receive our fair share.
A wealth tax is a modest policy whose time has well since come.
So let there be no shame in calling for one and in doing so declaring that we will not reward greed and excess, we will build a society in which we all have enough.
This Labour Government has an opportunity like no other: a mandate, a majority, and a moral imperative. It must embrace it.
Mercedes Villalba is a Scottish Labour MSP for the North East Scotland Region.