If the government wants growth it should be taxing wealth

Rachel Reeves says she wants growth. If so, she should tax wealth because the wealthy save much of what they earn, meaning that they don’t spend it, and so reduce growth. If that same income was redistributed to those on low incomes who would spend it, then growth would follow. It really is almost that easy to increase growth.

#uk #money #economic #politics #bank #government #tax

ABOUT RICHARD MURPHY
Richard Murphy is Professor of Accounting Practice at Sheffield University Management School. He is director of Tax Research LLP and the author of the Funding the Future blog. His best known book is ‘The Joy of Tax’.

This video was edited by Thomas Murphy.

DONATE TO KEEP THIS CHANNEL ADVERT FREE

RICHARD MURPHY ON TWITTER

HIT SUBSCRIBE & GET NOTIFICATIONS
Subscribe and get notified of new videos released.

PLAYLISTS:

#richardmurphy #richardjmurphy #economy #economics #accountancy #accounting #tax #uktax #ukeconomy #greennewdeal

[Allisonsmith]

Let's be very clear about one thing. The "market" has been massively wrong on what the Fed should do with the funds rate for at least 2.5 years now. In early 2022 before the Fed even started hiking, the market was already forecasting rate cuts to happen by end of 2022. The market at the start of 2024 had 7 rate cuts for 2024. Laughable to suggest the Fed is the one that has been getting this wrong. It has proven out that they were right to start hiking in early 2022, aggressively ramp up that funds rate, and then keep it at the terminal rate until now. Also, the Fed on numerous occasions has stated that a recession will likely occur as a result of this hiking cycle. The market consensus has been no or soft landing, which is another thing they will be massively wrong been engaged in active trading and managed to grow a nest egg of around 140k to a decent 739k....I'm especially grateful to Linda Wilburn, whose deep expertise and traditional trading acumen have been invaluable in this challenging, ever-evolving financial landscape.

[paulgibbons]

Under Corbyn there was a possibility.
Understarmer you will see nothing short of conservetism and grinding those already poor.
See how well my crystal ball works.

[lesleysaunders]

It’s obvious poverty always means people buy less and businesses go bankrupt. It really doesn’t matter how cheap products are people don’t spend money they don’t have .

[theotherandrew]

This is obvious. It’s so good to hear an economist saying it.

[davidbiley]

You missed the point completely. It’s the super rich that need to be taxed. Not the middle classes, from income and CGT.

[fjorddenierbear]

Outrageous viewpoint.
Millionaires have left Norway for this very reason.
In Norway your wealth is taxed above approximately GBP 200k, which affects every single Norwegian who cares about saving.
Sure, if you only tax the top 1%, I wouldn't be affected, but the slippery slope is not always a fallacy... Soon enough most people are affected like in Norway.
You better make that citizenship global taxation, and be ready to lose lots of millionaires as they renounce their citizenship.

[ianmorrison]

True, inequality is accelerating at an incredible rate. One area in which we were admired by other countries was us having a thriving middle class, as this doesn't exist in most countries. I think it won't be long until the 'Great' is taken out of Great Britain.

[mortelski]

This is grossly unfair, as, depending what amounts you class as “wealth” it rewards the feckless and reckless by punishing the frugal. E.G. The financially illiterate, who have been suckered into taking on PCP’s, end up being subsidised by those who can do maths and save up for their initial outlay. My “wealth” is taxed income that I have delayed spending to subsidise 20+ years (hopefully) of rainy days when I am no longer working. I intend to spend it all, or give it to people or causes that I choose if there is any left. So ultimately I will be penniless. But at the point of retirement, I will necessarily be “wealthy”, as I am just about to enter a long period with no income from work. What right do you have to take away (tax a second time) the choices I have worked all my life to create?

[alanrumble]

Completely agree. Too much money is tied up in the savings of the rich. Taking some of the wealth from those who would not miss it from a financial point of view and putting it in the pockets of those who would spend it on essential items must be good for the economy.

[waikanaebeach]

I agree. Most wealth is gathered through rent seeking on labour and capital. Much easier to make your second million than your first. Wealth concentration has significant political negative implications

[neilsmith]

10T out of the 15T private wealth is held in pension or residential property in UK. None is subject to capital gains and stamp duty is avoided on residential property. Are we talking out this wealth. No because it the voters who own this and those who do not aspire to have both.

[fburton]

What about the specific case of land assets? An explainer and comment on Land Value Tax would be good.

[felixcklau]

Rich people don’t spend all their money but they invest, which boosts growth. Government policy should encourage them to invest. That creates wealth.

Furthermore, wealthy people can LEAVE to avoid tax.

[downshift]

Richard, your point in the notes is flawed.

"Rachel Reeves says she wants growth. If so, she should tax wealth because the wealthy save much of what they earn, meaning that they don’t spend it, and so reduce growth. If that same income was redistributed to those on low incomes who would spend it, then growth would follow. It really is almost that easy to increase growth"


The wealthy do not hoard bank deposits. They are spent on assets. I myself do not have a lot of bank deposits, but I have disproportionate assets. By doing this, I have not reduced growth. The money I spent is held by others who are free to spend it. Even if I had purchases gilts (thereby reducing reserves), the government is free to create more money (reserves) to satisfy my savings habit. The government is also free to spend the money it creates to those on low incomes if it believes that growth will follow.

[justinstephenson]

Another video which is theoretically correct but fails when it meets reality.

Let us look at examples of countries which have tried wealth taxes. France had a wealth tax and found it actually reduced economic growth. Sweden had one for years and some economists believe that the capital flight was equal to up to 25% of the economy. Even Norway is complaining that its wealth tax is counter-productive.

In all cases the reason is the same - wealthy people have the money to leave. Even if their wealth is derived from business in the taxing country, once the decision makers leave the country the business will follow.

The evidence is clear wealth taxes (in the sense of an annual tax on asset wealth) do not work - they might if they were done by an international body on a completely international basis, but there is absolutely no chance of that happening any time soon.

Capital Gains tax is different because unlike what Richard seems to believe, CGT is NOT A WEALTH TAX, it is a transaction tax - it is only payable when you sell an asset. The more interesting question is what is the right CGT rate. Whilst I like having CGT rates equal to income tax rates to eliminate tax avoidance (the old schemes of converting income into capital gains or vice versa), it doesn't mean it is the best rate for the economy and since CGT was introduced in 1965 we have tried a few different rates, some with indexation and some without.

[thpark]

If you want less of something, tax it. If you want less wealth, tax it. But don’t pretend it somehow ‘creates GDP’ or wealth anywhere else. It reduces wealth, and shrinks GDP.

[gotbharmony]

Useful vdeo. Wealth inequality is a serious issue in the Western world. Gary's Economics explains this matter very clearly.

This isn't about envy or a desire for some form of crazy Marxism it's a serious analysis of why our economy isn't working.

For a healthy economy, we need the majority of the population to have the ability to spend money in the UK economy. We also need some degree of wealth redistribution to have a healthy society both physically and mentally. This isn't a call for a scrounger's charter. The welfare state needs to be scaled back to those who truly can't contribute rather than those who don't want to work.

There are, of course, many problems that need fixing, but we have to start somewhere.

Don't expect change to happen easily. The wealthy have control of most things and aren't about to relinquish their control. We'll need to fight relentlessly but first we have to get people to understand what is going on beyond the tittle-tattle drivel pumped out by mainstream media.

[stephfoxwell]

The richest 2% hold 37% of wealth and 22% of incomes.
They are worth approximately £4.8 million each.
Their wealth has increased by 75% in 15 years.
A one off levy of 5% on wealth above £2million in the UK would raise £240 billion.

[Justin-qhzn]

I find your short concise lectures absolutely fascinating, extremely informative and helpful

[hstwodrainage.]

That would be a sure way for people to take their money somewhere else.