I’m not rich, by the way. That’s the thing about wealth taxes. Once the principle has been introduced, everyone is at risk of paying them.
I’ve paid because my partner is Norwegian and I’ve lived over there, and her country is one of the few in the world to impose this controversial tax.
That will soon change if the Labour Party’s trade union backers have their way.
The Trade Unions Congress (TUC) has called on Keir Starmer to launch a tax raid on the wealthy to fund his spending plans if he wins the next election as seems likely.
Under its plan, wealthy individuals would pay a one-off tax of 1.7 percent on any assets over £3million.
This would rise to 2.1 percent on any wealth above £5 million, then 3.5 percent on assets over £10million.
The TUC’s proposal comes with a dollop of class envy, with general secretary Paul Nowak accusing wealthy British households of “hoarding wealth and getting richer and richer, while working people struggle to get by”.
He added: “Porsche sales are at record highs, bankers’ bonuses are at eye-watering levels, and chief executive pay is surging.”
There is always a market for bashing the rich and I agree with the principle that those who have more, should contribute more.
Although I’d point out that they do already, with the richest one percent contributing more than a third of all UK tax revenues.
Instead of demonising them, we might thank them. And shouldn’t begrudge them the odd Porsche, provided they earned their money fairly and pay their taxes in the same spirit.
The TUC claims it has drawn inspiration from Spain’s solidarity tax, a temporary charge on the better off to help the country survive the cost-of-living crisis.
Nowak’s language speaks more of division than solidarity. That’s not my main concern, though.
My big worry is that a UK wealth tax won’t be a one-off and it won’t stop at the wealthy, either.
UK taxes never do. Neither does Norway’s wealth tax.
The threshold for paying Norwegian wealth tax is 1.7 million krone. That is just £128,302 at today’s exchange rate.
That’s right. You only need around £130k of assets to pay it.
Although that excludes the value of your main home and pensions, pretty much everything else comes into its orbit. Cash in the bank, investment funds (Norwegians don’t an Isa allowance) and even the value of your car.
You don’t have to be particularly wealthy to pay it, in other words. That same will apply to a UK wealth tax, given time.
The Treasury has a long and inglorious history of introducing taxes that start small then grow very big. Income tax was only two percent at first.
Once the principle of a wealth tax has been set, Brits are in trouble. That one-off levy will soon become an annual charge. That £3million threshold will fall year after year, while the percentage taken will rise and rise.
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It’s happening in Norway. In 2021, its wealth tax stood at 0.85 percent. In 2022, it nudged upwards to 0.95 percent. Today’s left-wing government has hiked that to one percent (and 1.1 percent on wealth above £1.5million).
This wasn’t much of an issue for a modest earner like me, but it’s a big issue for Norwegian business owners because they are charged wealth tax on the value of their company.
This leads to the bizarre situation where they are forced to sell shares every year to meet their huge wealth tax bill, even if their firm is losing money.
Its millionaires and billionaires are fleeing in droves, and taking their tax revenues with them.
Norway can always pump out more oil and gas to top up its coffers, but the UK doesn’t have that option.
We desperately need to hold onto our rich people and should be finding ways of creating more of them.
I suspect Starmer and his Chancellor Rachael Reece will want nothing to do with a wealth tax. Denis Healey didn’t touch it when last proposed in the 1970s.
He said it was too complex and could cause more trouble than it was worth.
Let’s hope I’m right. Even if the wealth tax doesn’t catch you today, it will get you tomorrow.
