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Will taxing the rich solve the UK’s problems?

With the UK Government still borrowing a staggering £1bn every three days to fund its spending deficit, political debate has been moving towards the idea of taxing the wealthiest of the population in order to stem the deficit. Ideas emerging from the Lib Dem conference include a so called ‘mansion tax’, whereby anyone owning a house over £1m in value will be subject to an annual 1% tax on its value. Politicians from all sides appear to be more receptive to this idea than, certainly, they were a year ago and the idea seems to be gaining momentum.
At the other end of the spectrum an idea put forward in the New Statesman by Peter Tatchell is that of a one-off graduated 20 per cent wealth tax on the richest 10 per cent of the population. This, it is argued, would raise £800bn. The article claims that the wealthiest 10 per cent of the population have combined personal assets totalling £4,000,000,000,000, so making the once-only 20 per cent tax on their immense wealth affordable. Mr Tatchell claims that it is in their self-interest to pay this tax because if we slip into a new depression they will lose much more than 20 per cent of their wealth.
Whilst I am all in favour of everyone paying their fair share of tax, I think that an examination of UK tax receipts is most illuminating. The top 1%, who earn £156,000 or above, will pay 24.2% of all income tax this year, on their 10.8% share of all income. The top 10% of all earners, on at least £50,500 will pay 55.3% of all income tax.
However, the most revealing figure is that for the very wealthy; the top 31,000 tax payers, who make £500,000 or more, pay £14.8bn in income tax. This exceeds the £13.9bn paid by the 13.6m taxpayers on £20,000 or less.
It does not take a genius to work out what would happen if ever higher taxes lead to an exodus of the very wealthy from these shores.

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