A Calvinist wealth seizure is utter madness

Linda J. Dodson

As Keynes pithily put it (with a little exaggeration), the country would not be any richer if the entire national debt was paid off. We owe the debt to ourselves (mostly). We print our own currency. This is smoke and mirrors.

The collective nation is not the singular and proverbial Schwabian Hausfrau. The Bank of England is currently mopping up the entire debt issuance of Her Majesty’s Treasury. This QE will never be unwound or “repaid”, whatever the pro-forma assurances.

It is pure monetary financing of the fiscal deficit – People’s QE, helicopter money, MMT, or whatever you want to call it – and much of the developed world is doing the same thing.

There are excellent reasons to reverse the toxic trend of rising wealth and income inequality. A Brazilian GINI coefficient is no foundation for a flourishing modern democracy. It violates the solidarity principle and erodes the trust that underpins our rule of law.

My conclusion after living many years in Latin America is that inequality itself – the feeling that life is rigged, and the law is a racket – is the chief cause of the perennial failure to close the economic gap. It is the mirror image of the egalitarian success story in the Nordic/Hanseatic zone. But it does not take the sledgehammer of wealth confiscation to soften inequality.

What the UK needs is surgical tax reform to make the system fairer, but without damaging incentives, and all within the context of net fiscal expansion until we are safely beyond the aftershocks of Covid-19 – that is to say, until the output gap is closed again and a little extra for good measure.

Prof Jonathan Portes from King’s College London says the first imperative is to grasp the nettle on our soak-the-poor council tax. Most developed countries have a flat tax based on value. The UK has its scandalous bands.

Residents of a £10m mansion in Kensington pay £2,473 a year, barely more than a struggling young couple in a one bedroom flat. In the socialist republic of New York (Nassau County), they would pay £245,000 for the privilege. In Boston they would pay £122,000, in Los Angeles £75,000.

Sorting out this anomaly would go some way to rectifying a powerful sense of injustice – and might free up some housing at the margin – without harming the productive economy. No doubt readers have many other suggestions.

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