Rainer Zitelmann: Wealth taxes would not be popular, or Conservative. Sunak must remember this tomorrow.

7 Jul

Dr. Rainer Zitelmann is a historian and sociologist. The data cited in this article is analysed in detail in his recently published book The Rich in Public Opinion

Over the past couple of weeks, UK Treasury officials have been contacting private bankers to sound them out on how the country’s richest citizens might help pay for the huge cost of Coronavirus relief packages. Ahead of Rishi Sunak’s big speech tomorrow, this should be worrying for many.

Austerity might be off the menu for the state, but it’s definitely the dish that is being prepared by civil servants to be served to everyone else.

Labour are getting in on the act too with Annalise Dodds, the Shadow Chancellor, stepping onto the Sunday shows to explain with zero detail that the burden of higher taxation ought to fall on those with the “broadest shoulders” and that taxes needed to reflect the “increase in income and wealth inequality over recent years.” She’d called for wealth taxes in the preceding week during a speech at the IFS, again with scant information on what this would actually look like.

Now, leaving aside the fact that a lot of income and wealth inequality is mostly a proxy for geographic inequality and restrictions on growth of jobs and homes outside of major centres of population, we should question what brings together the Shadow Chancellor and Civil Service. Especially when it looks a lot like trying to confiscate wealth and punish those that have worked hard to get on in life.

This isn’t Conservative. The Civil Service should be reminded of that fact, and the party should remember the benefit of providing some clear blue water between the reds in Labour and the Tories in power. Rishi Sunak on Wednesday should signal he’s going in quite the different direction to keep Conservatives and the country on side.

In fact the party of a low-tax dynamic free market that in December ruled out an increase in the rates of income tax, National Insurance or VAT – should also remember voters aren’t keen on the state coming for wealth either.

In a poll conducted in 2018 by Ipsos Mori across the UK, France and Germany, voters were asked their attitudes to the rich and to tax asks of them. They were presented with two statements:

The first was: The taxes on the rich should be high but not excessively high because they have generally worked hard to earn their wealth, and the state should not take too much away from them.

Over the UK as a whole, 29 per cent agreed. Of Labour voters, 20 per cent agreed. Of Conservative voters, 46 per cent agreed.

The second: The rich should not only pay high taxes, but they should pay very high taxes. In this way, the state can ensure that the gap between the rich and the poor does not become too great.

Of the UK population as a whole, 38 per cent agree. Of Labour voters, 53 per cent agreed. Of Conservative voters, 21 per cent agreed.

What the survey was designed to reveal is the proportion of the population in a given country that envies the rich (“social enviers”) and compared this with the proportion who do not (“non-enviers”).

While there is a section of the population in Great Britain that envies the rich, the number of enviers in Great Britain is much smaller than in the other countries. Much lower in fact.

The survey data was used to calculate a Social Envy Coefficient – the higher the coefficient, the higher the proportion of social envy.

The coefficient for France is 1.21, which means there are considerably more social enviers in France than non-enviers. Germany’s coefficient is 0.97, which means there is an even balance between social enviers and non-enviers. In the United States, the coefficient is significantly lower at 0.42. But the lowest coefficient is for the UK, at 0.37.

In other words, a clear majority of the British population are not envious of the rich.

There are significant differences between what Conservative voters and Labour voters think about the rich. Conservative voters say that society as a whole benefits from the existence of rich people (e.g. as entrepreneurs who create new products) but just a fifth of Labour voters think the same.

Despite a platform of envy and higher taxes on offer from the most far-left Labour leader in history, the British people decided to plump for the man opposed to them. Instead of thinking of the rich as a cash cow, when asked to describe the rich Conservative voters plucked for the following terms: industrious, imaginative, visionary, bold, intelligent, and ruthless.

Five out of six being positive traits ain’t bad. Labour voters under Corbyn plucked for the alternative, rich people to them were: materialistic, industrious too, ruthless, bold, self-centred, and greedy.

Starmer has done a good job of modernising his party, but he needs to win over Tory voters that thought of the rich as imaginative industrialists, not just pander to a coalition that thinks of them as ruthless greedy materialists that has failed twice to put the party into power.

Like throughout the pandemic, the UK is not the first to encounter the issues at play. When a few years ago the then socialist president François Hollande introduced a supertax on France’s highest earners, many wealthy people left France.

The tax was subsequently abolished. And France’s neighbour Germany found that the bureaucracy associated with levying a wealth tax is simply not worth it. As a result, Germany has waived its wealth tax since 1997.

Treasury officials and Tory strategists should realise: Britain is a low-envy country; a pro-growth country, and one that knows that imposing more envy taxes on wealthier people simply will not work.

Leave this idea to the Labour left and start pushing for growth by removing, rather than adding to, the burden of the state on businesses and families.