Millionaires To Get The Wealth Tax They’ve Been Asking For

On Monday (13 July), 83 millionaires signed a letter asking for higher wealth taxes. Now, those taxes might be heading their way after the U.K. government ordered a review of the capital gains tax.

“I’m relatively rich. I’ve never paid capital gains tax in my life,” says Gary Stevenson, one of those who signed the ‘Millionaires for Humanity’ letter.

The group of millionaires, spread between the U.S. and Europe, asked for higher taxes, “Immediately. Substantially. Permanently.” However, the letter was vague on details.

A change in capital gains tax might be the answer they were looking for, says Stevenson: “Capital gains tax is compulsory for people in the middle and voluntary for people at the top because it’s very easily and legally avoidable.

“If you never sell you never pay capital gains tax and who are the people who can most easily never sell? It’s the very very rich.”

The tax only applies to assets that are sold and it is currently at a historically low rate. However, the U.K. chancellor Rishi Sunak has called for a review after the Office for Budget Responsibility said that £60 billion ($76 billion) in taxes would be needed to make up the current budget deficit.

Any increase to capital gains tax would hit the U.K.’s property market, where £5.09 trillion ($6.5 trillion) in private wealth is tied up. But “it should also be remembered that landlords are already facing Covid related requests for rent reductions or holidays,” says Rod Smith, a partner and head of private clients at Royds Withy King, a law firm.

Other millionaires might not be so pleased to see tax increases in different guises. Speaking anonymously, one entrepreneur said that he is responsible for thousands of jobs: “Taxing my assets more will only slow down any hiring decisions and that is not what the economy needs right now.”

‘I’ve Made A Lot Of Money’

With higher taxes, Stevenson says a “humanitarian disaster” might be averted.

Right now, however, that is exactly where we’re heading: “I’m predicting, and I’ve bet on, and I’ve made a lot of money on, asset prices rocketing again, just as they did in 2008 where very large scale printing was used to fix the crises. And that money tended to find its way towards the bank accounts of richer people,” says Stevenson who made his millions as a trader at Citibank.

While the rich benefit from these economic stimulus packages poorer households do not.

Worse, they cannot save money like the well-off. Most of their spending is on essential services, which needs to be maintained pandemic or no pandemic. “I’ve come from a poor background. I’ve been poor. For a brief time I was middle class and now I’m quite rich. I’ve seen the whole spectrum. I’ve seen how people spend,” says Stevenson.

The combination of rising asset prices for the rich and forthcoming job losses for the poor is an “absolute disaster”, he says. “And it’ll be in real terms a humanitarian disaster for most people as well.”

Although Stevenson says now is “an unbelievable opportunity” to change the way the rich are taxed, wealth taxes have been historically and politically unpopular.

In the last U.K. election, Jeremy Corbyn’s package of measures against the rich was forcing many to contemplate moving abroad. Meanwhile, Elizabeth Warren’s wealth tax drew ire from her own party as well as oppositions.

However, that was all before coronavirus. Should the perfect storm of economic forces now cause a humanitarian situation in wealthy nations, their leaders will have no other option than to introduce a wealth tax, if just to pay for some of the money spent over the past five months.

“I’m not a Communist here. I’m not saying it’ll be perfect equality,” adds Stevenson.