Governments around the world are on the verge of going bust, ballooning debts, expanding deficits, with the spectre of the return of 2022’s inflation ever present. Whether it is the fault of covid, in the case of the UK, Brexit or a process of spending more that the country has been able to take in through taxes, is besides the point, it appears whatever the cause, the debts are very likely beyond repayment. However, to draw from Ernest Hemingway, the road to bankruptcy is that it begins as a gradual process, before everything suddenly unravels. People may be aware of Warren Buffet’s 8th wonder of the world being compound interest, the same is also true in reverse when interest works against you on the loans that you own. Fail to meet the repayment schedule, meet with the debt team, restructure the loan at a higher rate because you’re now higher risk, and end up owing more money that you still can’t pay off. Irrespective of this, when one is Chancellor of the Exchequer, with black holes to fill, you have to show willing, and look for sources of funds to address the deficits. In the case of the UK, it feels like it is no longer about filling black holes, but providing some confidence to the bond market, so yields fall and borrowing costs reduce (so they can add still more to the debt pile). If only “Rachel from complaints’’” actions hadn’t had the opposite effect, as rates have gradually returned to the peak of the mini budget calamity of 2022.

The politics of envy will view this situation as a clear, moral opportunity to help redress the balance of inequality within our once great nation, the rich have taking too much from this country, creating this debt and leaving the “rest of us” struggling to make ends meet. Interestingly, PM Sir Kier Starmer appears to view most “working people” as one of the “rest of us” individuals, working paycheque to paycheque, not holding assets and “can’t “write a cheque to get out of difficulties”” (FYI, this is not “working people”, this is “in a shit situation people”). As a result, the focus on the Labour government is oriented around these poor individuals, meaning anyone outside this could, and should be fair game to have their pockets picked. “I know, let’s increase capital gains rates on those rich shareholders, but to keep it said, even for lower earners we’ll whack their rates increasing by an eye waters 80%, because they are obviously not “working people” is they are able to save. But turns out, when people are in the lower tax bracket, they don’t make much in capital gains, so out of pure envy of anyone attempting to better themselves, they likely didn’t earn much more money. Combined with this, if there are higher capital gains taxes, one is also less likely to sell to incur a taxable event, so for me, higher rates lead to longer term holding, as I wait for the return on an investment to cover the additional tax bill.

So, from this last observation, we can reflect on how a change in tax can change behaviour. It doesn’t have to be viewed as a means of siphoning off earnings, if one takes a broader perspective on taxation, it is a useful stick to curb undesirable behaviours, maybe taxes on smoking, drinking or driving a petrol powered car (unless people continue smoking irrespective of what it costs them due to the addiction). From this perspective, increases in capital gains taxes may actually reduce tax income, as it punishing individuals more for investing and then realising profits from investment. Unfortunately, the knock-on-effect of this is then not only does the government lose the capital gains tax revenue, but also the potential growth realised when individuals spend the money that they’ve made, into the economy (insert Homer “Doh” meme here). So, if the government can’t earn more money when the “rich non-working people” sell their assets, what can they do? Oh yeah, tax their assets even if they don’t sell, also known as a wealth tax.

But let’s not be coy about this, what does a wealth tax, that hasn’t required you to sell or realise a profit, actually represent? It is someone, elected to public office, under the pretence that their aim is to improve the country they serve (also see get re-elected), deciding that a portion of the assets and wealth an individual as accumulated maybe through inheritance but likely hard work (because they’re rather keen to stop you inheriting anything at all), no longer belongs to them, with this tax now being the possession of the government. It is also worth noting the same was tried with farm inheritence, and choosing that you could no longer pass the pension you had worked so hard for onto your spouse; gaslight the public for years to save in pensions, then rug pull them, sorry, that money you were promised in now ours. Some people say wealth tax, but for me, I’m going to stick my neck out and say bare faced asset seizure. While individuals with large, liquid share portfolios may be able to sell portions of their assets, potentially incurring additional capital gains taxes to cover their tax bill, farmers and homeowners will have much more difficulty. Without taking on a bank loan, how might a farmer or homeowner sell a fraction of their asset to cover their HMRC invoice, and if the government was to repossess a farm for non-payment of taxes, would they be able to operate it effectively? This in not pie in the sky musings, the inheritance tax, also in the 2024 budget introduced inheritance tax of farmers, even if they struggle massively while providing food for the nation. This tax has been has been listed as a contributing factor for a farmer taking his own life; the Chancellor is responsible for this death.

The way around this, again consistent with the politics of envy is how these taxes are presented to the general public of “working people”, even your honest, local farmers are at times villainised, as sitting on great wealth that is shielded from the tax man (how dare they struggle to make ends meet, using their assets to feed us?). But even staying away from the contentious subject of farms, the wealth tax can take another angle, only focusing on the “super rich”. Charities that I have previously considered in a positive light propose the need for a wealth tax is needed in the UK (2% on assets over £10mn), populist politician have also gain great popularity by proposing similar policies (1% on assets over £10mn and 2% over £1bn). For the financially stretched “working people”, these thresholds feel outside the realms of comprehension, why would anyone ever need so much money? But as soon as you take a step back and realise that due to the onward march of currency debasement, these figures need to be put into context. Even with official inflation figures, £10 million in 1990 would be the equivalent of £24million today, or as given politicians propensity for fiscal drag, if thresholds were not changed, £10mn in 1990 would be the same at £3.8mn today (and who believes official inflation figures). With these figure put into a point on a continue with a vector of inflation working on it, even a good, £1mn pension today might not be worth much in the future, particularly if inflation starts to rise dramatically.

But still, for those who may not even have a personal pension, are not on the housing ladder and most certainly don’t own any assets, these figures are likely beyond comprehension, why should these assets not be taken from the rich property owners? And this is where the buck stops, with one simple question, why did someone ever work to amass such levels of wealth? In some cases, this may have been the result of inheritance, other may be victims of asset inflation, caused by inflation of the money supply; houses haven’t always been worth many multiples of a person’s salary. For those who are often the target of “working peoples’” anger, they to have created personal wealth at great scale, the Elon Musks, Jeff Bazos’s, Larry Pages or James Dysons of this world. While the nuances of personal motivations are beyond the scope of this piece, part of their aim was to solve problems for the future customers, and while profits may have been a pleasant side effect, it may not have been their aim in the first place. Drawing from Peter Drucker, the management guru, the purpose of a business is to create a customer, and if they are successful, they will produce wealth for society. This wealth can take multiple forms, with one being economic, distributed to the stakeholders of the business, which include the government in the form of income, business and likely sales taxes. Added to this, the top 1% of earning in the UK paid 29% of the country’s taxes (in 2023-2024), meaning they already pay more than their fair share, with the business and employees likely making up a good chunk of the remaining 71% of tax revenues.

An interesting side note of this situation was highlighted in The Sovereign Individual, where the compound impact of taxation on an individuals’ life time earnings was immense. Combined with this fact, if these individuals are so incredibly productive, how much more wealth would they be able to create if they were not expected to give so much away, to fund government programmes (but let’s be honest, mainly paying interest on what could be viewed as bad loans or benefits of those not willing to earn money themselves). For this reason, combined with their need to deliver shareholder value, it is then logical that those owning both large and smaller companies give attention to allocating resources wisely, so the amount spent on esuring taxes meet legal requirements, but is not excessive. Interestingly, in an effort to promote economic growth, government incentivizes companies to reduce their tax bill by investing in “plant and machinery”, so while wanting more taxes, government also incentivize companies to reduce their tax bill. Such a bind for the government, incenvising investment to promote future growth while forfeiting short term taxation, if only they focused more on promoting growth than grabbing tax which the labour government appear fixated upon.

So, from both a person and business perspective, wealthy individuals have incentives to reduce their tax bill, whether for personal reasons or the growth of their company. As a result, if these individuals were to be taxed more, as with increases in capital gains taxes, it would be logical for their behaviour to change. If a new plant was to be taxed at a higher rate in the UK, compared to somewhere else, what would the logical decision be? If their direct salaried income was to be taxed at a higher rate than share options, equity or capital gains, what would be the most logical route for remunerations? In both cases, the one that resulted in the most efficient tax bill, to create the most wealth for shareholders and leave the highest likelihood that there would be another new factory, with the associated employment opportunities in the future. They are incentived to pay the required tax, and viewed with a wider lens, they are incentivised by national and global tax policy to manage the tax they pay, they are being demonised while also being promoting by government to do what they do.

However, the government are a capritious short sighted bunch, and may not like this, meaning their Eye of Sauron could then turn on not only the flow of salary but the accumulated stock of wealth. If this happened, the owners of this wealth will also make decisions and change their behaviour to account for it. If it looks like a wealth tax, whether 1% or 2% on whichever figure was a possibility, if they don’t think it is a good use of their resources, they have the flexibility to move (unlike most “working people”), with almost every country globally, happy to offer even moderate rates of taxation in order to attract them to their jurisdiction.

The current Labour government appears to not appreciate individuals’ ability to make choices for the betterment of themselves; increases in capital gains, less selling; increase in national insurance, lay off staff; increases in employee protection, less recruitment. While they (and other parties) skirt around the idea of a wealth tax, they appear blinkered to the mobility of this wealth, combined with how much they already contribute. To target these high earners would provide a signal globally that the government had made a decision to penalise successful individuals who already pay the most tax, by being required to pay more. The impact of this would then likely be that once the higher earners had left, the attention would move to the next tier of wealth, 7, 5, £3mn in assets (very close to £1mn in 1990 terms), to a point when everyone with anything, whether real estate, shares, pensions, or bitcoin, would be required to offer up a portion of it to the high alter of government inefficiency, waste and a ballooning benefits bill, to remain within the letter of the law (also see staying out of jail).

An interesting, alternative perspective on the idea of wealth taxes is not only the impact it would have on the wealthy, but also the impact it would have on those aspiring to one day be wealthy. What would the motivation for a young entrepreneur to build their business, create and serve their customers, only to have their any accumulated wealth taken away from them, once they have been deemed “successful enough”? Without such motivation, the only remaining aim would be to become one of Kier Starmer’s “working people”, struggling to make ends meet, never being able to save or build for a brighter future. From this spot, the alternate option of collecting benefits, but more likely, the realisation of such a dire future will lead to a decline in mental health, with the potential to apply for addition disability payments. For me, the wealth tax has nothing to do with raising money for the Treasury’s ballooning expenses, but a means of victimising and villainising the successful, to bring everyone down to a lower, societal rung. Identifying the villain, to build support against, to find a common enemy they can take assets from and distribute them to who without.

This thought is astronomically dark, crushing the human spirit of bettering themselves and providing for their loved ones and their progeny. However, this may not be quite so far off the mark, particularly, when a society that “advocate gradualist, reformist and democratic means in a journey towards radical ends” is quite so closely aligned to the Labour party’s aim. This “Fabian Society“, that promotes “greater equality of power, wealth and opportunity” seem on the face of it to possess laudable aims, that in practice, very quickly become a race to the bottom, with all the horrors associated with actual communism. History shows use that if no one has personal responsibility or is able to personally benefit from their own pursuit, ingenuity or ideas, people go hungry; central planning and the central control of the means of communication simply don’t cut it.

For me, the question then returns to how a country (a democratic one) could become controlled by such a group of people, or whether so many MPs actually view what they are doing as promoting the “social good”. Curtis Yarvin used the example of a democratically elected pilot, with the person being elected based on what they promised rather than their ability to actually operate the plane. The same can be seen within the Labour government; are the most capable individuals elected, able to understand and work through the tough decisions required to turn the ship around? Unfortunately, it appears not; if relatively limited benefit reforms cannot be passsed, due to many MPs refusing to support plans that would adversely affect their constituents, by voting in a way that improves their chances of re-election, they are simply voting in a purely selfish way. Rather than the best and brightest being elected to high office, many MPs appear heavily reliant on their £93.9k salary, so are unable to be seen a going against the wants of those who voted for them. Many of these individuals are not capable of commanding such a wage in the private sector, so much so, some MPs will even only take the living wage from their salary, as they admit they are not worth any more. While not wanting to single out a particular member (although I know of some that fit this characterisation), I imagine a new graduate, or even a university dropout, looking to get ahead, and see a role in politics as their best chance of fame and fortune. They have not particular ability, not drive to enact change through entrepreneurial means, but believe their country owes them the ability to take the moral high ground and share their views as a “selfless public servant”. Following a brief stint in a parliamentary office or union, they fit the template for what is required in a particular, safe, parliamentary seat and get elected. Unable to bring any real-world experience, understanding or knowledge to the house, they happily vote to maintain the status quo of managed decline. I ask that you look at your MP or local councellor, and ask whether a route similar this got them a wage that took your tax payer money?

If this is the person that was elected to parliament, what are the chances they can understand the blood, sweat, tears and sacrifice that go into running a business? What are the chances that they fully understand the impact of the bond market or deficit spending on the country as a whole? One would hope that all the Philosophy, Politics and Economics graduates would be well versed with this, but if the ‘E’ part of their studies is underpinned by the questionable logic of Mr. Keynes, they are likely blind to the benefits of a stable currency and living within one’s means. But also, what are the chances that these individuals, potentially progressing from their “working people” wage’s view of those with assets as “the other”, to be plundered for the needs of the many unfortunates who voted for them? These are the same individuals who will likely vote through further increases in public spending, paid for by a wealth tax, while residing over the further acceleration of the wealthy fleeing the country, while all the while repeating the mantra “we need to invest more in our public services”.

Whether they’ll ever realise their beloved “public money” will quickly become funded through “public debt” as all wealth creating individuals, wealthy, quite wealthy, not particularly wealthy or even aspiring to be wealthy have jumped ship to places they are welcomed with open arms. Everyone left will be cold, hungry and looking to target anyone with slightly more than they have, complaining that life is tough, but at least all those horrid billionaires aren’t exploiting everyone. The mantra of “eat the rich” may have gained favour, but, the rich are mobile, they’ll leave, so pursuing such hate filled and distructive ideologies will likely result in eating your own young.

While I admit, I’ve not been able to solve the national debt problem with my ramblings, I hope I’ve at least been able to explore why a wealth tax will do nothing but create further, deeper problems, while embedded more hate within a society. I didn’t even get into the unfunded liabilities of the public sector pension, which have been used to attract further uncreative, unaspirational individuals that add further state bloat, without consideration of actually paying their bills. All I have to suggest is to build an understanding of the situation beyond that of the current crop of MPs and appreciate that owning assets is the only way you’ll be able escape the paycheque-to-paycheque rat race of being a “working person”. If the work you do actually adds value, there is a chance you’ll be able to accumulate these assets, while also taking meaning from the work you do, unlike the mindless grunts the political class talk of (and many are).

When the communist wolves are at the door, be prepared to fight (or exit stage left)

Tax the rich? Nah mate, how’s about we turn the mirror back onto the greedy, unproductive political class?

Sack the leeches.