The Right-wing case for wealth tax Britain’s middle class is being shafted

In the near future, possibly before the end of the year, Elon Musk will become the first trillionaire in history. According to Forbes, Musk’s fortune already exceeds $500 billion, more than the GDP of his native South Africa. But with the impending IPO of SpaceX, that is set to climb higher still. If the spaceflight and AI company floats for $1.5 trillion, as is widely anticipated, then Musk would become four times wealthier than that other rocket-obsessed svengali, Jeff Bezos.

The scale of such riches is new, at least in the democratic age. At the turn of the millennium, it was Bill Gates who held the mantle of the world’s wealthiest person. Yet back then, when Britney Spears was a break-out teen sensation, and Vodafone was one of the world’s most valuable firms, Gates’s personal worth stood at a mere $60 billion, around $116 billion in today’s prices. Soon, though, Musk will possess a fortune ten times that.

Musk’s rise, as well as that of his fellow tech barons, is thus an object lesson in wealth inequality. While that is most glaring in the United States, where Wall Street rubs shoulders with Mississippi, a state where women are more likely to die in childbirth than Uzbekistan, Britain is far from immune. According to the Sunday Times rich list, the combined fortune of the country’s 200 wealthiest families stands at 20% of GDP. In 1994, long after the Thatcherite revolution had prevailed, it was a mere 6%. In France, meanwhile, the 500 most affluent families had a combined wealth equivalent to 6% of national output 35 years ago. Today, by contrast, that figure is 42%. If Musk is an eye-catching luminary of our gilded elite, his personal rise is just the most visible expression of a far broader transformation. 

While there’s little doubt these have been boom years for the ultra-rich, a conclusive explanation as to why that happened remains elusive. Some point to the demise of organized labor in the West, others to the increased centrality of high-value services in the economy, meaning productivity gains accrued to elite-tier knowledge workers. Then there’s long-term shifts in asset values over the last five decades, primarily driven by a decades-long collapse in interest rates, and more recently compounded by quantitative easing.

Whatever drove the growth of a globally mobile super-rich — and it likely includes all of the above — it’s important to clarify such a shift isn’t limited to countries with a low-tax “Anglo-Saxon” model of capitalism. If that were the case, then Finland, Sweden, Denmark and Norway, all high-tax, high-welfare economies, wouldn’t boast more billionaires per capita than Britain. The same applies to France. While it has numerically fewer billionaires than here, the wealth of the billionaire class across the Channel is around three times greater. Yet tax still matters. Because whatever the other explanations for the West’s spiraling inequality, the fact remains that billionaires, and multi-millionaires too, pay relatively less of it than the rest of us.

The extent of such “tax efficiency” is shocking. In France, the average citizen hands over 51% of their income to the state once you account for consumption taxes. You might think that’s reasonable: given the republic’s outstanding healthcare system, high-speed rail and public infrastructure. Or you might feel it’s excessive, a moral affront to self-reliance and hard work. But that’s not really the point, because the kicker is this: the effective tax rate for the country’s billionaires, which includes the two wealthiest families in Europe, is less than half that, with just 13% going to authorities in Paris. Prefiguring today’s rhetoric of a rigged economic system, Marx once wrote that the modern state is a committee for managing the affairs of the bourgeoisie. Given the deal billionaires now get, such an outcome would be outlandishly egalitarian. 

What explains such a misalignment? The answer is income tax, and how it’s become a thing for the little people. As data compiled by Gabriel Zucman and his International Tax Observatory concludes, billionaires in France, Italy and the Nordics pay an effective income tax rate of between zero and 2%. Zucman suspects the figure for Britain is roughly the same, though the relevant data has, so far, proved challenging to collect. 

For inequality campaigners, this isn’t merely an issue of fairness, but of recursive dysfunction. By taxing incomes more than we tax wealth, we let the ultra-rich get wealthier, at a faster rate, by allowing them to re-invest capital into yet more assets. Often yielding rents, which in turn bring higher returns than government bonds or public equities, altogether contributing to pervasive rent-seeking across the economy — from land and private equity to the pursuit of monopolistic business models with venture capital. 

That all means wealth inequality widens further still. If you aren’t an oligarch, your best bet is to try something similar, albeit on a smaller scale: whether it’s becoming a buy-to-let landlord or entering the “gold mine” that is housing vulnerable children. No less dispiriting, this soon creates a vicious circle. Lower taxes on capital gains and asset ownership means more rentierism. More rentierism means more inequality and more state dysfunction. What’s on the line, ultimately, is the destruction of that central pillar of democratic society: the prosperous middle class.

In response, some on the Left have rallied around the idea of a wealth tax. Thomas Piketty first touted the idea more than a decade ago, but it has since been popularized in Britain by figures such as Gary Stevenson and Zack Polanski. In France, for its part, Zucman has influenced figures in both the Socialist Party and the more radical La France Insoumise. Even Wes Streeting recently spoke of his desire to equalize tax on capital gains with income, while Andy Burnham has spoken about a land value tax. While neither is an explicit commitment to a wealth tax, both Labour rivals seemingly agree the ultra-rich presently pay too little.

And yet despite such conversations on the Left, the center-Right — the very tendency meant to promote the interests of the aspirational, propertied middle class — is more likely to dismiss a wealth tax. In a stunning example of negative polarization, where your own position is based on the opposite of what your opponent says, the party of family capital often seems gleeful about its rejection of taxing the very richest. 

Why would pro-market conservatives, who claim to represent successful, affluent people, be happy for those richer than them to pay effectively zero in income tax? One explanation is ambition, and the fantasy that the middle classes might one day join such rarefied company; that a successful Home Countries accountant is merely a temporarily embarrassed oligarch. Talk of taxing the very wealthiest thus sounds too close to burdening them with more taxes. And, frankly, they pay quite enough already. 

But that’s exactly the point. Because such groups — generally pro-business and skeptical of the state — contribute an outsized amount to HMRC. Britain increasingly feels like a standard bell curve: at one end, those on low incomes and pensioners pay comparatively little to the Exchequer, except by way of consumption taxes (visit a Home Counties garden center on the Bank Holiday and you’ll see what I mean). The jet set, meanwhile, have landed themselves in the same category. All of which leaves the middle, who are left to support the system while withdrawing increasingly little from it. The most extraordinary example of this is the £100,000 “tax trap”, where earnings between £100,000 and £125,140 are subject to a 60% marginal tax rate, not to mention the loss of benefits such as free child care. 

Why would anyone facing such a situation support oligarchs paying so little into the system? And yes, they do exist. I’ve met them. To be clear: a wealth tax is not a silver bullet. The estimated revenue generated by a 2% tax on those with wealth above £100 million would be between £10-£15 billion. To put that into context, Britain spends more than £200 billion a year on health and social care. Yet such sums remain considerable. Last year, for instance, the policing budget for England and Wales amounted to £16 billion. The British Transport Police has been cut to the bone, and even with Starmer’s recent public largesse are subject to further cuts. So if you want fewer fare dodgers on the London Underground and less antisocial behavior on trains — both supposedly cherished center-Right goals — that means hiring more people to actually enforce the rules. 

Trading standards are another area that could be helped by a wealth tax. In response to a recent BBC expose, the Government awarded officers an additional £6 million a year to deal with the scourge of low-level criminality on high streets. But that’s a paltry sum when you consider that, in some areas, as many as half of convenience and vape shops are suspected to have criminal links. Nor do the center-Right arguments for a wealth tax end there. For one thing, the deficit, a perennial concern for fiscal conservatives, might be addressed if the very richest paid the same effective tax rate as the rest of us. Similarly inheritance tax — something I personally support but which raises huge passions on the Right — could be abolished in its stead. 

Yet the very same voices who claim to care for such things fall silent when it’s proposed that the wealthiest fund them. In part, certainly, this explains the demise of the Conservative Party, underscoring how beholden it’s become to finance, Big Tech and the ultra-rich rather than its petit bourgeois base. In Tory world, it is acceptable for nurses to graduate with over £50,000 of debt — and for solicitors to lose access to free childcare — while a billionaire landlord can effectively escape taxation altogether. Little wonder, then, that lifelong Conservative voters are flocking to Reform. There’s a problem with that too, however, given Farage and his friends similarly seem to believe that American tech billionaires and land-owning dukes share the same economic interests as Britain’s squeezed middle.

The counter-argument to a wealth tax — especially among those who claim to be otherwise sympathetic — is enforcing it. In a globalized economy, they muse, capital is too mobile, and millionaires and billionaires can go elsewhere. That is true to an extent, though recent events in the Gulf show the value in long-trusted safe havens like London and New York. And even for those willing to risk a move to the other side of the world — or anyway just Milan — a simple tool is available: adopting a system, like the US, that taxes nationals on global earnings regardless of where they live. 

Some Right-wing ideologues will tell you this is impossible. Yet it’s precisely what the historic champion of free markets has done. Simply put, you make it illegal to not file, and pay the relevant taxes to, HMRC — even if you’re a British citizen and reside elsewhere. As with the United States, this would apply to lower-tax jurisdictions, so the Cayman Islands or Qatar rather than Sweden or France, where you pay the difference beyond a certain threshold (the Americans call this the “Foreign Earned Income Exclusion”). The idea, after all, is to tax ultra-rich tax dodgers, not simply those who work overseas.

For some, of course, that won’t make a difference. But the vast majority would want to play by the rules, whatever the online screeching: the inconvenience, bureaucracy and stigma of illegality wouldn’t be worth it. Besides, even with a tax of 2% on anything north of £100 million, most billionaires would still be paying a lower effective rate than a headmaster or doctor. All told, then, the arguments for a wealth tax have never been stronger, on the Right if nowhere else. If so-called conservatives want to preserve the middle-class prosperity of the last century, it will be a crucial, and I suspect inevitable, tool. 

Over the last decade, the Right has been proven spectacularly correct about certain things, not least the importance of place in political life. It’s all the stranger, then, how many on that side of the divide insist such thinking, somehow, doesn’t apply to the wealthiest. Maybe one day, after Musk starts his first libertarian space colony, affluent Brits will flock to Mars rather than Dubai, Singapore and Malta. Until then, His Majesty’s Revenue and Customs officers should be enforcing a wealth tax on our richest compatriots — wherever they happen to live. 

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