Are our millionaires taxed enough?

hello and welcome to today's ia debate my name is christian nimitz and i am the head of political economy here at dia i'm joined today by gary stevenson who is an economist who specializes in inequality former city trader and a member of patriotic millionaires um gary welcome i'm also joined by mark littlewood who is of course the director general of the institute of economic affairs i'm starting with you gary since yo the guest um you also run a youtube channel gary's economics you are an economics activist one could say can you tell us a little bit about what what is your basic uh economic philosophy what is geronomics and what are you trying to achieve with this yeah so well my background is as a trader basically i studied economics at the school of economics um i became a trader in 2008. so my job was betting on interest rates which you will be aware they went to zero all over the world in 2008 because of the financial crisis um so then very quickly my job became to predict when will interest rates recover which is a rough proxy for when will the economy recover and um the historic story of that is very interesting because markets in 2008 said that they would occur in 2009 in 2009 they said 2010 in 2010 it was 2011 and 2011 it was 2012 in 2012 it was 2013 and even in 2020 just before kovid markets were predicting a recovery interest rates later that year so markets have really incorrectly predicted this recovery for a long time and um my job was to understand why and i became fascinated basically understanding why we're not getting this recovery why are we not getting this recovery that everybody is expecting um and you can boil that down to basically a simple question of why aren't people spending money and for me i think i think i had an advantage and i came from quite a poor background that i was still living in the east end of london with the people i grew up with and i could see that money wasn't throwing down to these guys these guys weren't spending money because they weren't getting money but you guys will be aware a lot of money was being pumped into the system so i basically became obsessed with the simple understanding that the money doesn't get to the people then you will have no economic recovery because wealthy people they spend the money on basically assets it pushes up stock prices to push up house prices that doesn't really help the economy it doesn't help ordinary people so i came to the conclusion that because we have a problem with inequality it's not being sold we will have no economic recovery so i started to very aggressively that there would never be an economic recovery and by the end of 2011 i was citibank's most profitable trader in the world based on basically betting on an economic disaster so um i didn't want to be an activist to be honest but you know when this is your experience i think you kind of have to be and you know i've continued betting every year since 2011 that the economy will be weak i'm consistently right and i make very good money doing it um so i think the basic simple message is that there's a structural problem here with inequality if you don't fix inequality you will see a weak economy unaffordable housing low wage growth falling living standards um but never could that be more relevant than now because in the last few years during copied we've seen an unprecedented increase in inequality it's been the largest ever single increase in millionaire and billionaire wealth in this country the average billionaire increased their wealth by 630 million pounds in the first year of coverage like 22 average increase in wealth of the riches so you know i wrote a lot of articles at the beginning of covert saying this will be a disaster if you allow for an enormous increase in inequality as a result of this crisis which is what we have had then you will see increased house prices increased stock prices increased inequality increased costs of natural resources increased inflation and a massive decrease in standard of living and um that's what we've had so now i'm out here campaigning to let people know if you want to improve living standards if you don't want to see this kind of costly crisis you have to you have to tax the rich people you have to do something about inequality and you know i'm not a boring campaigner and i'm not just saying this um i've been betting on this for 15 years and i've been millions of pounds doing it we don't fix inequality we won't fix the economy well okay if if you keep winning by betting on a badly performing economy i hope you'll start losing some bets i hope i hope so uh mark i mean that's that's a fair point i i remember you've probably had similar experiences i remember i had a debate once with someone from i think occupy occupy activist who kept saying well capitalism is finished all downhill from here and i said to him well if you are so sure if you know things that other market participants don't know why don't you bet on it you could be a millionaire that that's an argument that people on our side often make now this would be considerably harder to make against gary because he has literally done that and he did beat the market so does that show that he's right well he has been right that's why he's rich i mean congratulations i mean and successfully predicting the future in almost any capacity is i mean gary was saying he was looking at interest rates other people try and judge which particular sectors of the economy might perform well if you judged at the outset that it was worth investing in tesla or apple if you had correctly made that prediction you would have made a lot of money so the market prices are there to be beaten i mean it's the market isn't telling you what will happen it's a permanent forum for debate and those who pick the right lane get yield the results so if gary's continually picked the right lane i mean it's rather more sophisticated about economics than picking horses but if you know which horse is going to win every race you're going to get very rich and the market will often tell you who the favorite is but that doesn't mean the favorite will win so my congratulations to gary and i probably agree on a chunk of his analysis actually i mean i'm not sitting here saying what are people complaining about it's been absolutely marvelous since 2008. we had a wobble with the banks but other than that everything is flourishing not at all productivity's low economic growth i'm doing this as a rounding but has been what in the uk about 1 since 2008 we've got some growth but pitiful by uh any long-term historical standards um real problems here structural problems i mean i think we live in a crony capitalist economy not a capitalist economy i think there's far too much rent seeking i think the state is far too big i disagree i think with gary on the in equality point i don't believe that the problem is too many billionaires you can argue about whether they fairly uh accrued that wealth or whether it was rigged in some fashion and i think it behooves free marketeers like those of us at the iaea to always keep an eye on whether the gains are genuinely market gotten gains or whether the system's been rigged in someone's favor and i would have sympathy that huge quantity of easing and asset bubbles and the rest of it tend to help the rich not just the billionaires by the way i've benefited personally to the tune of several hundred thousand pounds by the property price boom just because a ridiculous planning restrictions i mean it doesn't make me a billionaire but it's a good chunk of money so i'm not sure the problems inequality but i would agree with gary that there are very big problems here and i would also agree with him but i'm more worried of those at the bottom end of the scale right i mean people who now you know if there are these choices between heat or eat those human beings should be much more in our purview of concern than whether or not somebody can afford a new super yacht okay so some common ground here points a disagreement but that was uh to be expected gary can you just clarify you say you think uh inequality is the problem um that uh inequality leads to aggregate demand being too low that's if i understand you correct idea the argument uh because the rich have a higher propensity to save but then even if you how does that work in the long run i mean that's an argument that you can make in the depth of a recession if you have lots of rich people who just save their money and for some reason it doesn't get invested or not enough of it okay then from you can make a keynesian argument that will deepen the recession but how does that work in the long run surely saving is just deferred consumption so the rich may save but they spend they spend the money eventually they're not saving forever i mean that's a very good point you make um the rich save but they're not saving forever um do you think that's true do you think that say for example jeff bezos he's worth 200 billion pounds do you think he's intending to spend that at some point well maybe not him personally but somebody will inherit that money okay so this is going to be a bank account generally considered richard's wife is a billionaire okay assume she's worth one billion pounds she will make an income from that money of about five about 50 million pounds a year approximately in the first year of covered an average billionaire increase worth by 22 so she would have made probably about 440 million times a year imagine you made just from your wealth 400 million pounds how much would you spend i have no idea i mean these are numbers that i'm normally not dealing with okay well imagine you had a wealth of 10 million pounds and you you got from that every year you know 300 000 pounds would you spend it all probably not the statistics are very very clear if you look at the spending behavior of very rich people not only do they not spend down their wealth they don't even spend the full income from their wealth that's and it's i've got nothing against richmond i'm a rich person myself okay and i do the same thing i don't spend the full income from my wealth because then i can live off the income and my wealth can grow and that's what rich people do okay and in a strong economy that's not necessarily a problem right because if rich people are growing their wealth they can invest and the economy can grow okay but what if interest rates are stuck at zero percent what if interest rates have been zero said for nearly 15 years this is an economy in which rich people cannot invest their money they cannot invest their money because if interest rates are stuck at zero percent this shows you for sure that if investments are there to be done they will be done because companies can borrow at zero percent and that's 15 years now fifth we've had a 15-year situation and look i'm a rich person i'm an investor okay if you were to offer me a one percent real return i would take it every single investor in the world would because we live in a world where there's so much money held by the rich and so many assets held by the rich looking for investments that there's not enough investments to fulfill them and what the rich people do is they've got a ton of money coming in and there's no available investments i'll tell you what they do because i see it they buy my mates mom's houses and look at the collapse in home ownership rates for young people those homes are not disappearing those homes are being owned by rich people that that is what happens you know and those and mortgages you know which are skyrocketing in size they don't come from nowhere that money's being lent from rich people if you allow rich people to accumulate more and more and more wealth every year whilst ordinary people are seeing their ability to spend collapsing it is obvious that the wealth will transfer quicker and quicker and quicker from ordinary people to the rich and that is what's happening my background is mathematics okay i studied mathematics my undergrad if you have a system where there is a continual flow of assets from the masses to the rich that is not a stable system and you're seeing that now you know i come from a poor background my dad worked for the post office for 35 years okay he was able to buy a house you know we were never rich he's got a house paid off raise the kids you can't do that now you know i know people who've got degrees who will never be able to afford property you know right can i just say again i agree with some of your analysis of the symptoms here property prices are absolute bananas it's completely ridiculous i mean especially here in london right but across the uk as a whole was absolutely absurd the ratio of property prices to to average incomes but i'm not persuaded that this is because jeff bezos is not spending his money um uh i'm not persuaded of that uh i mean in fact if uh billionaires want to buy lots of property uh the sort of ia broadline on this is build a lot more i mean and the whole problem has been a lack of supply now so if you've got almost it's not quite a fixed supply but if you're not building more and loads of people want a house unsurprisingly the prices go up if these office wants to spend these tens of billions on housing blimey this should be a boom for the british building and construction industry we can build whole towns for him to to to purchase and hold downs for post office workers and the rest of purchase to my mind that's a supply problem and the real way to crack that is a supply side revolution if a billionaire wants to buy a hundred homes good luck to him i just want to make sure the supply is there for you know average joe on an average wage to buy a home as well so you know you're treating the kind of stock of housing in this in in this case as being a kind of act of god i'm saying public policy can change that let's build a lot more houses can only buy so many houses i wish that were true because because i would love for the house price crisis to be over i would dearly love that you know i'm still relatively young and i see how bad it affects my friends actually my family you know they want to have they want to have families with their own disaster and they can't afford houses right but um i lived in tokyo for two years okay tokyo has 37 million people enough housing 37 million people housing is not really more affordable than here you know go to manhattan it's extremely dense you know you can build extremely dense cities and the housing is not more affordable well yeah i mean manhattan is the equivalent of mayfair if you were to look at the usa as a whole it is enormously more affordable places where people want to live well i mean listen it's i think it's important to realize that it is not only housing which has become phenomenally expensive all assets have become phenomenally expensive sure stocks have become phenomenally expensive land has become phenomenally expensive gold has become phenomenally expensive this is what you would imagine to happen if you gave all of the wealth to people who like to buy assets and who likes to buy assets the rich and look you know i've been betting on this for a long time and you know i wrote my i wrote my thesis on this oxford if you give the money to the rich they will buy assets and asset price will go up and interest rates will come down you know you don't have to agree with me but i've been saying it for 12 years and i've been right you know it's not creating a booming investment and if that's true that would be true even if you had no crony capitalism i mean you made that distinction between cronyism and gains that are made in the market but if it becomes uh self-perpetuating if you don't have an investment crisis the rich don't know what to do with their money just by assets that could be true even if there was no cronyism well that's true i mean you one starts to get in here to what you think the calls and effectives i mean i actually uh think it's not the asset boom that's causing low interest rates it's low interest rates that's causing the asset boot right i mean on a very very modest level you know i'm kind of modestly affluent middle class uh uh you know my decision has been put everything in assets i don't want it in my barclays savings account with a half percent interest rate you've got to be joking i'm going to pour it into the stock market or even thinking about buying myself a second home a small flat somewhere because i anticipate those rates for return will be higher so i think a lot of the asset boom has been a reflection of a decision by central banks to keep interest rates very low and i'd like us to unravel that i think that you know if you know the broad the broad gist of interest rates having to be a couple of percent above inflation they're all there abouts has been observed in the breach i think ridiculous we've got seven percent inflation and interest rates on the floor now i'm conscious you probably can't just jack interest rates up to say 10 or 12 tomorrow because the short-term shock but i'm with gary i i wish his prediction had been wrong uh but i would have liked to assume an incremental return to something like normal interest rates over the past 15 years we have not seen that and a lot of these problems are caused by us not having bitten that bullet and you can always chew the bullets slowly rather than having to actually bite it and you know the longer you leave it the worse it gets but interest rates have been a joke as of monetary policy isn't that just a political choice central banks could set interest rates high if they wanted to so this is the exact area that i've worked in observing central banks what do they do um since 2008 we have seen a number of central banks attempt to raise interest rates the most obvious example is the us that raise the rates to talk about two and a half percent um and what happened eventually they were pushed back because when you live in a world where there's no positive yielding investments no significantly positively yielding investments and there's a huge amount of money being held by rich people who want to invest as soon as something pops up like i said a one percent real your investment everybody rushes in and buys it because because there's a huge amount of money looking for investment and there's not much not enough spending so when central banks have done this and it's not only the u.s have tried this you know australia and new zealand tried it the scandinavians have tried it even the ecb tried it at one point i think maybe possibly two points every single time the central bank stuck their head up they're gonna try to raise interest rates their currency went through the roof it created the recession and they had to back down you know i think there is there's a broad economic situation here of too much money being saved and not enough money being spent and that creates an asset boom i think i don't think that's a controversial statement at this point i think most economists would agree with that and the savings ratio is too high you think yeah yeah i mean although you think that the central policy is a mistake yes this is the consensus this is the reason why interest rates have been on the floor you know and and i think you will to an extent you're likely to see what you want because over the next couple of years it's very likely that global interest rates central bank rates are going to rise possibly not significantly possibly not to very high levels but i think we're going to see these interest rates move up to sort of two and a half percent but what you're going to see is the economy is so phenomenally weak two or three hops in real terms not in real time it's not well in that case they're still negative right they probably will stay limited well i think this is a disaster for uh all of the sort of things that i would like to see in a flourishing economy that ain't happening the creative destruction of free markets is an important part of it when you've got interest rates on the floor zombie companies become if not the norm at least uh sustainable entities you don't get productivity growth it's possible for companies that otherwise would have gone bust with what you might call a natural normal interest rate to survive those companies therefore don't tend to be the most productive you've therefore got a misallocation of resources you therefore have a whole load of companies are just about getting by but not making the sort of breakthroughs that you need if you want to yearn for three four five percent gdp growth param which is what i want to yearn for so i think you know i'm not trying to pin all of it on interest rates i think there are a whole load of other problems in the economy i think our tax system is wrecked i think our regulatory system is ridiculous um so there are other things that are pushing down growth as well but low interest rates seem to be a real cause of that problem now if you decide that actually what you want because now is not the time to readjust or recalibrate the economy in any strategic way what you want is a lot of consumption now as christian was saying at the start you know my god we've got a recession we've just got to get people spending spending spending um we've got to get money into their hands okay that's a kind of keynesian crisis management tool but over the longer term uh i want to see the i want to see businesses grow go bust be replaced by better businesses with a better allocation resources and i think low interest rates are working quite strongly against that normal market force of creative destruction i think it's it might if i may yeah i think it's important to think about what it would actually mean if interest rates go up and interest rates are going up okay interest rates are expected by the market to go up to sort of two to nine percent normally in the uk which as you point out will probably stay negative but they are going up you know when you raise interest rates it's effectively transferred wealth from debtors to creditors okay well in the last two years the government has taken an enormous amount of debt out and that credit is sitting the statistics all show as an enormous increase in cash held by wealthy individuals you know it's i think it's important people realize how enormous this is you know and just to give a sense of scale the most expensive thing announced by rishi sunak in the summer statement was cutting income tax which will cost the government about six billion pounds a year the amount of money printed and given out by the government during kobe which ended up with richer people was 450 billion pounds so that's 75 times larger it's um nothing in my opinion nothing else really matters with regards to the economy it's vitally important that we realize 450 billion pounds has been transferred from the government to the wealthy in the last few years a phenomenally large amount and if you raise interest rates now that means the government will have to start paying interest to the rich on that 400 billion pounds and debtors which is you know young people young families young parents will have to pay higher interest on their mortgages too the rich this is going to make inequality but again i'm just trying to work out whether we're vigorously agreeing but just looking at this down the different ends of the telescope the government governments of of all stripes have decided since 2001 to run budget deficits it's now more than 20 years since we were on a budget so but much much larger than the last two years significantly less what's going on covered obviously colossal but also it was very you know very large in the media aftermath of the 2008 crash the austerity of the coalition government was a very modest cut in real terms expensive but still deficit deficit deficit deficit deficit so if the policy of the government is to spend more money than it is bringing in in receipts receipts basically tax revenues they might have one or two minor ways of raising money other than that i guess sale of assets that kind of thing but basically if the government in rough and ready terms wants to spend more than tax revenue it needs to pour out money so it needs to borrow it from the likes of you or jeff bezos because we've decided we haven't got the money to spend on the nhs this year or on education or on road building or whatever it might be but we're going to do it anyway and that requires us to use some of gary's money to do as a lender some money gary so we can keep the lights on in the hospital this year now you can approve or disapprove of that but that's been a political decision to consume to spend more than the government's actually got in its wallet to spend more than it's got in its coffers not just once for a generation now uh let alone the promises and the sort of liabilities of gold-plated public sector pensions that we're all going to have to pay now that's a political choice and if you want to meet those bills you've got to find the resources from somewhere guess what gary and jeff bezos come into view you know how about lending us some money because we want to spend it now so i mean that's what's happened and i'm wondering whether you're on the same side as me that the government should have balanced his books a long long time ago i mean on that statement yes because there's an alternative to borrowing which is the tax rich people you know that last 20 years let's move on to that policy conclusions yes uh what would that look like i mean uh as far as i can tell britain already has a fairly progressive tax and benefit system the top one percent pays something like 30 of total tax revenue why is that not enough income earners um but the the richest people don't have very high taxable income because they know how to avoid it yeah it's very pertinent right now you know it's in the newspapers very significantly that some senior members of government might be close within their families to some level of tax avoidance you know listen i i earn a lot of money okay and i i love money by working and to be honest sometimes i think it was ridiculous the amount of money i was paid to work but i paid 50 tax at that time there was a temporary 50 income tax threshold which i paid um and yet the duke of westminster inherits eight billion pounds and pays nothing you know so i'm probably in the top one percent of earnest that year officially because that's taxable income but the duke of estimates the reason he pays nothing is because that is not classified as taxable income so what we currently have is a tax system which is very effective at taxing people like me who come from poor backgrounds but manage to do well and make some money and extremely bad at taxing people like the duke of westminster or like rishi sonax's dear wife who don't work for their money so you know what we really have is a tax system which is fair on poor people but doesn't tax rich people at all because i'm nowhere near as rich as your ex-wife or as the duke of westminster because when you look at the truly rich they pay almost nothing so how can you say it's a progressive tax system well i mean you have to base it on something and at least the top percentile as it is based on the reality i'm not a billionaire billionaires pay less than me is that fair is that progressive okay so it's not about the tax rate lifetime income on individuals all sources it's not even nearly progressive it's massively regressive at the top end everybody knows this everybody knows this billionaires are paying virtually nothing and it's it's it's the people who are watching this teachers lawyers doctors taxi drivers cleaners they're paying their taxes and people like me you know i pay my attacks and the billionaires are paying like that it's not a progressive tax system what do you want to do about that i mean i i take it for you it's not about the tax rate as such but how you assess what are taxes paid on in the first place yeah i mean that's the thing that really talking about the rate is is meaningless when when the riches don't pay any rail really the problem is avoidance and very often legal avoidance very often it's legal avoidance it's loopholes and it's the fact that very rich people are able to take income for example as capital gains in companies which they never have to sell the shares of so they never have to pay the tax on or it's in trusts inheritance tax is completely easily avoidable so really the problem is and i know mark would probably agree with me on this it's a ridiculously complicated tax system which allows the super rich to pay very very little in many cases nothing you know we know i've been on musk basis zero attacks every year you know he's the richest person in the world you know this is you know that's the us but you know zero tax elon musk right he i think he announced he paid zero tax in the most recent tax year i think he actually announced he'd written the largest ever that was more recent when he he sold some he sold something so he'll pay some capital gains i think in the previous tax yeah you pay zero you know so but that there is a there is a problem here um which i hope starts to sort of filter down the income or well flatter there are two things i want to uh pick to pick apart here and again let's sort of look at the the kind of middlingly rich you know i've accumulated wealth by savings and buying things um from my post-tax income right i've paid all of my income tax i've i've i don't think i've ever made a mistake i've filled in my forms loyally and got an accountant to check them and it's all come out and if i owe more i write the check and with what i've got left i buy stocks and shares and i'm clearing my mortgage my house is going up in value so you might then look at me i mean i'm not in the gary or bezos league you say well littlewood's a bit wealthy here let's go after his house and i'm saying well hey hang on a second i've bought that house having paid 40 tax on my income you know that that's i've already paid it once so there's a sort of um i think there's a question of double taxation sometimes that argument is unsophisticated because of course i go and buy you know i don't know alcohol or products with vat on them with my post tax income but one is whether you want to tax wealth the other is a is the laffer curve argument that you know and this is what i hope starts to move down the income spectrum is that the rich are extremely mobile i was trying to think lewis hamilton for example up and off from the uk i think it was monaco he went to it might have been switzerland i can't remember entirely to avoid tax um i know i won't name him but i know one very rich chap is that that's it i'm leaving the united kingdom am i going to move to gibraltar i'm not going to pay this level of tax and unless you are i mean those are extreme extreme examples uh more likely again as you're moving down the lower ends of the spectrum if the tax rate was very high on me you know i don't think i'd suddenly move to singapore but i might retire a bit earlier or try and cut my hours or some such like and all of that's a drain because the rich are mobile so there's a sweet spot somewhere and i think it's difficult to know whether actually dialing up these rates would improve that sweet spot i think in the french presidential elections the the chat melinchon who came third in the first round advocated a 100 income tax on all incomes above 360 000 euros per annum now you know you could sort of i think he just assumed that that money would sort of pour into the french government coffers more likely than not people would flee france and unless you're willing to impose a kind of berlin wall structure that that cash moves so uh i'm not against tax english i just think we need to be conscious of you know where the sweet spot is to get um either a fair rate but also a realistic uh rate of return and if if there were to be a position in which every billionaire leaves britain um because gary's tax rates have come in your revenues are going to be lower and your economy is going to be weaker these billionaires aren't employing people they're not you know buying their yachts and harboring them in british docks they've sorted off to singapore or texas or something the only issue of mobility if if your taxes suddenly went up you might say okay i have family connections here i i'm not that mobile i want to stay but specifically in the british case a lot of the people in the top percentile or so uh are originally from somewhere else so there is a perception that all immigrants all work as fruit pickers or construction workers but actually britain has a very high proportion of very wealthy immigrants now for those people i would imagine that mobility would be quite high if you've originally moved here from somewhere else it wouldn't be such a big step to say okay moving back okay so there's a few points there which you race i'm trying to come back on all of them and the first thing is you know when i talk about raising tax on the rich i'm not talking about somebody who has a house in london which has gone up to pass a million pounds you know that is a lot of money and there are if you have that you're lucky to have it i hope you couldn't afford that but we're not talking about taxing people with one million pounds we're talking about attacking people with 100 million pounds you know these guys are accumulating more and more and more and more and more and if they keep accumulating it will come from the rest of us especially from the poor and ordinary people in this country so i'm not going after people who've got houses in battersea that have gone up in price that's not what we're talking about we're talking about going off this is about unnerving my house isn't bad let's talk about mobility i think you brought up lewis hamilton and that's a really interesting example because lewis hamilton is actually someone like what i said before who is not from a wealthy background and whilst he is very wealthy enough and much more much worthy than i am he gets his money from working um so actually in my opinion it's not people at lewis hamilton who are the problem the problem is people who are enormously rich and simply hoard and accumulate wealth through not working and when we talk about mobility i think that is very interesting because i think one thing that has been sort of revealed in the last few months is people are mobile but assets are not very mobile because you know we have we have one of the richest people in the world in london roman grand victor and chelsea football club roman brown bridge can leave he can't take chelsea football club with him i think that's a fascinating insight and when i agree i mean it's worth saying if i've understood it correctly and i may be doing lewis hamilton a great disservice there i don't want to introduce him unfairly but i think he's now paying much less tax on his working income than he previously was right and lower than you and i even though he's earning massively more than you and i because he decided to move to a low tax jurisdiction what i'm talking about is raising tax on people who simply hoard wealth for generations and then we can lower tax on working people which can attract business to this country you know these are exactly the people who are easiest to tax because even if they leave they own the property a point of agreement here might be uh i mean i want our tax system to be fair but i also want it to be realistic and kind of non-contestable uh and i'm quite worried about a lot of our taxes that where you can see there's a good intention let's take corporation tax for example you know the concept being you know a big company that makes profits we'll come on we'll just take a slice of your profits you'll still have a load of profits what are you complaining about but it's an extremely inelegant tax because what exact profits have you made and where have you registered the iep and if it's an international process you know let's say the example i usually use is a hollywood blockbuster that's shown in a movie in london you know where's the prophet made some of it's presumably got to be you know written over to the hollywood studios some to the actors some to the cinema you've got that farcical argument with starbucks who are arguing that they don't make any profit in the uk because all of the profits derive from their brilliant architectural layout which is an intellectual piece of intellectual property registered in amsterdam i believe so you get this awkward situation where however well-intentioned initially you might think the taxes the taxes is paid by a negotiation across the table between the potential person being taxed and hmrc tax morale collapse because it's cutting a deal it's almost like a business deal i would much rather move our tax burden on to things that we that we can easily identify land would be a good example of that i'm in favor of land value tax property tax more and also onto things that if you like we don't like uh rather than things we want to encourage i mean it's a bit of a flippant point but they you know if the purpose of tobacco tax is to try and deter you from smoking and the purpose of alcohol tax is trying to deter you from drinking what's the purpose of income tax to try to tell you from working so i'm with you i'd shift that burden and but it needs to be both fair and also simple you know what i mean and you're right if you if you're if you want to tax let's say the ownership of english football clubs quite easy to do we can spot them they're there they have a postcode and address and the same with property in general or land in general it's all registered on the land registry you can't hide it i'd be very inclined to go down that uh not i won't see the overall tax burden full i just want to see the makeup of it change in something like a rational fashion would that work for you moving taxation towards tangible assets for me the single most important thing is that you you effectively tax the the very rich that's the most the fish rots my head down if if you this is please as an economist at the moment these people are often paying close to zero sure okay and they have enormous income just just think about what that does okay if you you allow a class of people who own large chunks of the country who receive enormous incomes and pay zero tax rates what will that what will they do of course they will buy the rest of the assets of course they will it's obvious that they will do that so if we do not tax these people they will own larger and larger shares of our country and it will bank up the rest of us in our government because you know if you were to give all of your assets to somebody else who has no obligation to give anything back to you and you cannot get anything back from them you will be bankrupted but you you seem to be seeing this gary which i don't think i do as a zero-sum game uh now it is obviously true if we take a pound from you and give it to somebody on uh below average salary it is true according to you know most economists that poorer person is more likely to spend that pound rather than to save that pound so if you want to increase consumption yes you get higher propensity to consume at the lower end of the scale but i'm not quite a zero-sum game as you i think a huge problem at the lower end of the spectrum is how heavily we're taxing ordinary people uh i mean absolutely extraordinary because you know there aren't i think there aren't enough billionaires for us to tax if you want if you want the government to keep spending all of this money we talk about cost of living crisis for most households tax is probably your biggest cost of living right not just your income tax but you know if you fancy going down the pub or you know going out shopping or whatever absolute colossal cost of living that tax burden would start if you could reduce that that gives these people a little bit of uh breathing room uh the idea that that should be considered fixed and government spending should be considered fixed and then and then we complain about energy bills and food bills i'm not trying to trivialize energy and food bills going up but that's only one element the household budget tax is is going to be a bigger part of the average household budget than energy bills so i think a smaller government would help and generally speaking i think we've got we've allowed a rather inefficient public sector to become too much of a proportion of our economy i don't go the whole hog i mean i think there is a you know we need a welfare state safety net i don't want people you know starving on the streets of our cities but the government is now you know touching 50 of all spending in the uk i mean into the 40s i've rounded up a little bit there that's just that's just ridiculous we're spending on welfare i think north of 10 000 pounds per household per year but the government can't seem to eliminate poverty i mean you'd assume that i don't know 70 80 90 of households don't need any welfare so you've then got i don't know 50 100 grand a year for the households that need it as ronnie reagan said somewhere there must be some overhead so i think a big government has led to us being unproductive i think high taxes has led to us being unproductive and i think regulation has gone crazy i mean we talk about the tax code at least you can count that if were to look at the books of regulations that every business needs to comply with i mean this is growing like topsy every year so we're spending a vast amount of our time going around complying rather than producing if you want a very compliant state that's great if which i think you and i want you want a very productive economy uh that's not so great so i can see all sorts of things here which could liberate the kind of average worker the average family that aren't based around necessarily how much more of bezos's money could we get or or equivalent uh uh equivalent people okay do you want to quickly come back to that segment let's look at what's happening right now let's look at what's happening right now government spending has increased massive last couple of years okay the government increased their debt by 450 billion pounds in the first year of kobe the richest 250 families in the country increased by 106 billion pounds all of that money ended up in the bank accounts of richer people okay 450 billion pounds okay that was printed money it's caused an inflation crisis which means ordinary people and not just the poorest we're talking about half the country here are worried about whether they can feed their families okay and that is because the government has given a huge amount of money to rich people we talk about the increasing size of the state what about the increasing size of the banks of these wealthy people they are not going to be struggling to pay the bills but those who those are the people we've borrowed from right we've borrowed from those people in order to spend on the nhs education where the implication of your statements going i think we should have spent less i think the government should basically balance the books every year well in the last two years so you think you should know the last two we should have built a surplus or some sort of sovereign wealth fund over the previous 15 years we we never mend the roof while the sun is shining but the problem is you know what if somebody else owns your roof and all of the resources you need to fix that roof you know like this is a situation where ordinary people can't afford to heat their homes but hang out the government the government controls history government spending is north of 40 percent 40p plus touching you know getting towards where does the money end up well ends up with the risk well no there's a huge spending problem do you think it's right that during a health crisis in which ordinary people can't afford to feed their kids and hit their homes the riches see the biggest ever historic bunch i'm trying to work out how a trillion pounds in rough and ready terms i think it's a little bit south of that a trillion pounds of government expenditure every year large tranches of which are attempted to to deal with the problems that you're worried about you know have people got access to healthcare have people got access to housing have people got enough money to put food on the table the the government is a pretty massive multinational company it's got a trillion a year to spend and i'm rather skeptical about how it is spending that to try and realize the ends that you and i would probably agree on that everybody can you know have a decent life and aren't worried about whether they can keep the lights on or food on the table but my god one trillion pounds a year of government spending doesn't seem to a crack that problem right let's maybe move on to some real world examples here because it's always easy to say oh well my kind of tax plan my kind of system would solve all that but gary is there any place in the world which gets this more or less right either now or in history because uh the idea of wealth taxation is is fairly old and there have been a couple of examples but i'm not aware of any success stories here west germany used to have a wealth tax and they abolished it at some point uh it didn't raise much revenue it was uh super complicated to administer uh much of it disappeared in the tax bureaucracy yeah so what would you do differently or is there anywhere i think there's one fantastic example of a country which did a very good job of taxing the very richest and did that to provide a good quality of living for ordinary people and you are sitting in that country it is this country in the 50s and 60s this country had very high rates of tax on the richest people and at that point in time an ordinary person could work an ordinary job and take care of family house prices on average two to three times income okay i'm guessing post-war britain isn't your idea no it's not my it's not my idea of nirvana um at all and i think there were a good number of things that were going well in the 50s and 60s there was a kind of entrepreneurial spirit in the in the in the post-war years despite the growth in government that i think was good for the economy you mentioned um uh wealth taxes in west germany christian i don't know anything about them i did take some notes of uh which i think i've shared with gary before about when this was tried in france now might be gary's got a better system but so i'm not going to hold you fully responsible for what flats while meteoran did in france in the 80s but he introduced a wealth tax in 1982 it's estimated that that cost the french government twice as much as it brought in in revenue due to tax flight between the start of the millennium the year and 2016 an estimated 60 000 millionaires exited france in 2016 12 000 millionaires alone exited france i think that's why macron scrapped the wealth tax again you can see the good intentions here but it doesn't seem to my mind that that's given the french government any more clay to mold anything with in fact possibly less not just not just as the french government got less revenue to tackle poverty or whatever the french economy suffered because these people are no longer spending their money in paris or whatever they're spending their money on or employing people so i would schedule where would be the best places to look i mean it's not the only thing that matters but economic growth is more or less what i want to strive for it's not the only thing that matters in a society and um if you're looking at the economic growth side of it you know singapore's been a colossal success story since the end of the second world war got quite a lot of concerns about its human rights side and how free how much free speech there is but if you just look in economic terms wow at the end of second world war singapore was about per capita same level of affluence as an average african country now way ahead of the uk in three generations hong kong obviously in turmoil at the moment but if you had to look at a historical example again hong kong from the end of the second world war until a few years ago tremendous success story switzerland i would say is a pretty good success story in in europe in recent years uh very affluent good economic growth strong currency what do all of those three countries have in common and i don't think you can just cut and paste that system and bring it to the uk i think you can only derive lessons from it you know i don't want people caned because they've gone jaywalking or spat out some chewing gum that's what i didn't want to borrow singapore's criminal justice system but what do they have in common in broad terms a low tax economy a relatively lightly regulated economy relative there are regulations but relatively likely regulated even if those regulations are deep and a relatively small state that sticks to its lane it might well be you know we're really going to focus this on welfare or cutting crime or on defending the our territory or whatever but it sticks to its lane rather than growing like toxic those uh where i've seen relative failure and the uk in the last 15 years have been a catastrophic place to live it's just been rather disappointing place to live but tended to go government's not staying in its lane every problem we come across the answer is more government spending any uh any affliction to the economy we need a new regulatory handbook to deal with it that's the road to rack and ruin in my view and what i also have in common those places is singapore hong kong switzerland they don't seem to be that bothered about billionaire and millionaire wealth so do to these places why do the problems that you describe why do they not seem to apply there i mean if you go to these places if you go to hong kong if you go to singapore if you go to switzerland they have many of the same problems we do unaffordable housing if you come from a poor family low levels of social mobility it's difficult to get good jobs if you come from poor background these are not nirvana's i've been there i've presumed they're not nirvana's yeah i haven't been i haven't been hong kong i've been in singapore the level of living there is not particularly high they have high levels of you know i mean these are essentially median incomes are very high yeah switzerland's a lot richer than well i mean singapore has a median income high but it doesn't include any of the iterative workers you know they have a huge number of basically workers from other countries malaysia and indonesia and their statistics are not included but gary what's the trajectory i mean look at how fast singapore's come in three generations it's spectacular i'm not pretending as i said they're not nirvana's i'm not saying singapore's got everything right far far from it okay nor switzerland but if you wanted to sort of look at countries that we might learn lessons from yeah to be richer and to be growing faster it seems to me those are a couple of countries you might want to have a long look at let's talk about trajectory use the term catastrophic you said that the uk economy is not catastrophic in the next year we're going to see literally half of this country one of the richest countries in the world not be able to heat their homes in the winter half of the country well that would be catastrophic that hasn't happened yet the last 15 years people above that are going to lose their entire disposable income increasing living standards increasing the cost of basically by 20 to 30 percent is going to be a good fashion i i i i think i mean you highlight the energy side there i i agree i think on energy the the our government's approach again politicians of all stripes over the last 10 or 15 years has been ludicrous do you think it's right that this country can be in a situation where half the country can't hit their homes in winter and yet we have seen the biggest ever increase in millionaire billionaire world and we are then raising taxes not on the billionaires but national insurance attacks on ordinary working people the people watching this will have their tax increase by two and a half percent and billionaires who often pay nothing are not seeing right so hang on the the the point of disagreement between us i i hope you'll accept is not that i wish billionaires to get richer whilst half the population shivers to you know and gets hypothermia right that's not the outcome i want i'm just not seeing that the solution to the energy problem and rising cost of living and rising house prices is to sort of go for the billionaires and try and get more of their resources i think the solutions are as i was outlining earlier liberalization of planning laws absolutely ridiculous how few houses we've built madness i think our energy strategy has been a catastrophe now obviously to some considerable degree this is being hit by geopolitical events in russia and ukraine but nevertheless uh on your energy bill the profits for a an energy company are dwarfed by the levies placed on that bill by the government i think the ratio is four to one five to one for every pound that the energy companies making in raw profit the government's taking four or five quid off you again i see the government as part of the problem on this cost of living crisis we haven't gone for shale gas i'm not saying that would completely assault the problem but there's something potentially here right under our feet that we've decided just to look at gift horse in the mouth these are really quite extraordinary bad strategic decisions that and if you accumulate enough bad strategic decisions over a long enough period of time then you get grimness and i'm not saying the last 15 years have been great you're saying that this coming year will be probably the worst of the last 15 i guess the last 15 years have not been great but it might have been a total catastrophe they've been a disappointment uh and a lot of people have had it tougher than you would have expected over a 15-year period but i'm not buying the if only we could sort of get our hands on the resources of a number of billionaires that would set it all right i think that i think actually that what's gone structurally wrong is from a million different points um energy policy regulatory policy tax policy planning policy uh the growth of the state all of these things combined for a toxic mix of a country and an economy going nowhere in fact going backwards spending beyond its means and if you keep spending like there's no tomorrow eventually there won't be yeah i don't think we're going to completely solve this conundrum now but since we're up against the clock and approaching the end um can i just look for some common ground maybe um gary uh it sounds like um that uh you don't see yourself as an anti-capitalist but more do you see yourself as a more like a keynes figure someone who's trying to save capitalism from itself what i'm getting at is do you have something positive to say about capitalism and free markets and the dynamism i see myself as a very good economist i'm the guy who's been right for the last 13 years and i'm i'm telling you what will happen now if we don't tax the rich we will see a disaster in this country we will see a humanitarian disaster in this country we are going to see half the country fall into real poverty not just relative property real poverty and i'm the guys been predicting it right for the last 13 years if we don't do something to take these resources back it doesn't get better it gets worse and worse and worse and worse and i've been betting on that for 15 years i've been right for 15 years i've made millions of pounds doing it and i really really hope we make sure that i'm actually wrong this time well i can only repeat i hope you will soon start losing a couple of bets um yeah i'm afraid that's all we got time for thank you both thanks gary mark and thank you for watching and listening don't forget of course to hit the subscribe button and watch this space we've got plenty more lined up thank you well if you enjoyed that conversation why not watch one of these other videos and while you're here remember to hit the subscribe button and the notification bell that way you'll never miss out on a single ia broadcast

Channel: Institute of Economic Affairs

Views: 84,453

Keywords: wealth tax, finance news, news, money, politics, taxation, tax, income tax, income tax vs wealth tax, wealth tax vs income tax, financial news, tax the rich, tax the wealthy, economics, business, finance, personal finance

Id: jJtZSdLKuCs

Length: 50min 32sec (3032 seconds)

Published: Fri Apr 15 2022