Dealing with disparities in wealth – some options

Two main approaches to dealing with wealth disparities are usually put forward -  to have a standard tax on wealth over a certain threshold or to tax income from wealth or transfers.

 

Taxing wealth over a certain level has a basic appeal – it seems fair to all. Yet there are questions about how to value wealth – on what date would the assessment fall for the annual tax determination?  There are other issues – not all wealth is equal – there is a difference between a farmer or small business person who uses the assets in the business and someone with a large property portfolio.  When looking at house values, higher values in many areas simply reflect the differences in the areas earning level and impact of other buyers on residents house prices.  And should the value of private pensions be treated as wealth? In essence pension assets are to there to provide an income in retirement.  Taxing the asset disadvantages those with private vis a vis public sector pensions.

 

So in theory a good idea but in practice difficult to achieve.

 

Taxes on income from wealth could be one source of revenue.  Currently National insurance is not levied on income from rents or shares.  Changes to the tax system (preferably making all income subject to income tax (incorporating the current NI) would be an option. 

 

As for taxes on transfers of wealth these are inherently unwise under the current approach.

 

So what are the options?

1)     taxing income from wealth a the same level as income from earnings. ;

2)     basing inheritance taxes on houses on the status of the beneficiary. This would enable those with little housing wealth to gain whereas those already holding property would pay more;https://www.cornwallecon.com/post/to-inherit-or-not-to-inherit-that-is-the-question

3)     Abolish IHT on farms and other businesses. For agriculture this post sets out some options for fairness for businesses;

https://www.cornwallecon.com/post/land-wealth-and-taxes-time-for-change-the-options

4)     Remove pension assets from the category of wealth.

 

Other policy options would need to be considered to remove the current inequalities in wealth.

 

One tricky area is the value of wealth in public sector housing and private rented housing. If this were allocated to the occupiers there would be a dramatic change in wealth levels. How to achieve this is more problematical!