By Manav Khindri
Illustration by Keo Morakod Ung
It is highly likely that most of the people reading this post would have heard of Gary Stevenson in the past weeks and months. A self-proclaimed maestro-City-trader-turned-activist, Stevenson’s online presence as a mouthpiece for the middle- and working-class has sent ripples throughout the country. His stated mission – to tackle the UK’s problem of depressed wages and high asset prices through tackling wealth inequality – is nothing new; the 2024 Green Party manifesto stated its intention to levy taxes of 1% on assets above £10m and 2% on assets above £1bn annually, and many other people and parties across the political Left have advocated for similar policies in the past. But the way Gary Stevenson has set out on his mission feels different to before – his background from a working-class family, his young adulthood as a multimillionaire trader and his ever-growing social media following contribute to the feeling that he is lightyears away from the Labour or Green Party narratives that have been dismissed as idealist in the past. In this piece, I will endeavour to explain what Stevenson is proposing and why, while also explaining why there has always been a pushback to proposed wealth taxes in the past.
In his blog Wealth Economics, Stevenson set out how his prediction of growing wealth inequality allowed him to make millions “betting against the British economy”. In many ways, his case made sense; an unequal wealth distribution leads to low wages, and the inclination of the ‘wealthy’ to save without the availability of productive investment opportunities leads to increased asset purchases. We would then be left in a position where wages are low, asset prices are high, and a vicious cycle is exacerbated. In his blog, which has been left idle for some time, he also calls for a radical – and bold – implementation of a ‘long time limit’ on the ownership of land and physical property. While this would be interesting to explore, we will not deal with it here, both for the sake of time and clarity. However, his call for a one-off wealth tax of 2% on assets over £10m would, according to Stevenson, help enforce the transfer of asset ownership from the wealthy to the lower – and middle-classes, and put a stop to the debilitating flow of wealth to a very small elite. Other campaigners sharing his views have also claimed that a similar wealth tax would raise over £36bn and completely fill in the ‘black hole’ in the public finances – which Chancellor Rachel Reeves has cited in the past as limiting the Labour Party’s fiscal agency. This financial hole, regardless of who is to blame, contributed in no small part to the seemingly austere measures outlined in the Spring Statement, in which the most substantial public expenditure cuts since the post-2010 era were announced.
The prevailing schools of economic thought seem opposed to a wealth tax – why? Put simply, the available economic (and political) evidence suggests that they are ineffective, or at least have been ineffective in their execution to date. Most iterations have been scrapped, and the case of France gives compelling evidence as to why a wealth tax may not be beneficial. First of all, it is deeply politically divisive – and for a campaign geared towards wealth redistribution to be successful, it must be able to survive beyond political swings. The impôt sur la fortune(ISF)was brought in by left-wing President Mittlerand, swiftly abandoned by his successor, and then reinstated once again upon Mittlerand’s re-election. Despite Stevenson’s initial call for a UK wealth tax to be one-off, longstanding reform is not going to be enacted with a saving of £36bn. Secondly, France reported a net outflow of more than 60,000 millionaires between 2000 and 2016 because wealthy individuals who did not want to pay a higher level of tax sought residence in neighbouring European states. Not only were wealth tax revenues hit by this, but expected VAT, income tax and capital gains tax revenues were also lost as a result. Capital flight is estimated to have lowered French GDP through the loss of investment capital by high-wealth individuals now choosing to reside and invest elsewhere. Finally, a rise in ISF fraud to undervalue assets also increased administrative costs and meant the tax became more hassle than was worth.
However, is it perhaps time to change the perception of taxation? Its use here is not strictly a means of raising government revenues, but more a means of achieving a more equal distribution of wealth within society. As a result, viewing it through the lens of a cost-benefit analysis, not least in the short-term, will be futile and mean that we conclude that wealth reform is not worth pursuing. The introduction of a wealth tax in the UK may also pave the way for a lower income tax burden on lower income households, meaning working people have more money in their pocket. Viewed through the Keynesian lens, the economy would not only experience the benefits of higher aggregate demand, but lower levels of private debt, and the associated higher macro-level financial stability it brings, could steady the British economy and the trust within it. Stability, confidence and prosperity at the lower end of the earnings scale breeds investment, diverting wealthy people’s savings away from inflated assets (e.g. houses) and into economically productive enterprises. For this to occur, the perception of the tool of taxation needs to be addressed.
There is also the problem of inflated weight being given to the role of GDP. A 2008 report found that the impact of almost 20 years of wealth tax in France diminished GDP by roughly 0.2% per year. While undoubtedly sizeable, a shadow can be cast on whether using GDP as a metric is distracting; even its creator, Simon Kuznets, warned that “the welfare of a nation can scarcely be inferred from a measure of national income”. So to disregard a wealth tax based on fears of GDP losses would be counterintuitive.
In recent weeks, Gary Stevenson’s own focus on tackling wealth inequality has broadened beyond his narrow focus on a wealth tax. He has begun discussing how taxes on gains from wealth can be implemented to enact change. Tackling wealth inequality requires holistic change, and a wealth tax would not be my first port of call. Closing the various tax loopholes exploited by ultra-wealthy corporations and individuals would not only make back a massive portion of the finances lost to tax avoidance and evasion – the initial £5.5bn estimate of tax evasion losses for 2022/23 has been found to be a ‘significant underestimate’ – but also instil more trust and transparency in the tax system. Large corporations should not feel that they are being punished, but they should be made to pay their fair share – a share which, ultimately, goes towards guaranteeing the continued existence of a market for their goods in the first place. That is, it helps guarantee a market in which demand remains at healthy levels because the working- and middle-classes are allowed to thrive. Without a holistic approach in public policy, a wealth tax would not be particularly effective, not least if it was only ‘one-off’, as has been discussed.
Regardless of whether you agree with the notion of a wealth tax, or even if you like the man, Gary Stevenson’s massive social media popularity indubitably reflects a growing displeasure by the working- and middle-classes towards the UK’s governing direction. While polls reflect discontent with the Labour government’s Spring Statement and refusal to rule out more tax hikes in the autumn, it would seem that many are left feeling that what they were promised is not being delivered. It is little wonder that public zeal for a wealth tax is on the rise again when ordinary people feel it is their wages being squeezed in the name of fiscal responsibility.
UCL Rethinking Economics 