Gary Stevenson—a man who claims he used to be the best trader in the UK—is starting to gain popularity as a man who comes from a working-class background, has moved in the circles of the elites and knows how the economy really works. He has appeared on many establishment outlets like Channel 4 and BBC Question Time to argue that wealth inequality is the real driver behind falling living standards and increasing stagnation. To fix this, Stevenson argues, there must be an introduction of a wealth tax. Unfortunately, his whole argument seems to fall apart under the proper scrutiny, which Britain’s political elites are unable to give as they too are captured by a lack of understanding of economics.
Stevenson begins his analysis by correctly identifying that the response by the government to the 2008 financial crisis and the covid pandemic resulted in huge wealth transfers to the richest in society. He states that interest rates being lowered to almost zero caused the wealthiest to borrow money to buy up all the assets in society and take wealth from the poorest. This results in a society where—even if the government hands out checks to ordinary people, as we saw during covid—they are still going to see their wealth disappear as the wealthiest have bought the assets, like housing, meaning they receive the money—originally sent to the poor—through payments like rent. A wealth tax, he claims, will address this inequality.
He claimed on BBC Question Time—when challenged on whether a wealth tax would work—that the UK implemented it successfully during the 50s, 60s and 70s. Even though there certainly was no wealth tax during that period, Stevenson can be given the benefit of the doubt since he may have meant that there effectively was a wealth tax as marginal tax rates were extremely high—in the 80 percent to 90 percent range.
It is true that during this period there was rising equality in incomes and wealth, but if Stevenson were right that the taxation caused it, you would expect that the share of total tax receipts paid by the top one percent would have been astronomical. The data tell us the opposite, suggesting that the top one percent of earners found ways to legally avoid the extreme levels of taxation; thus, it’s certainly not black and white that the high tax rates caused the rising equality seen during that time period. If Stevenson’s thesis is correct that the high tax rates caused a redistribution of wealth, the expectation is that the share of tax receipts from the highest earners would be very high, but that was not the case. Therefore, Stevenson cannot claim that a wealth tax would work to bring about economic equality.
Opponents of Stevenson have repeatedly made the point that wealth taxes have a record of abject failure, but witnessing the reaction to this argument suggests that this is not cutting through. There needs to be a change of tack when making the argument that a wealth tax will not work.
Let us assume that Stevenson implements the wealth tax perfectly—his dream implementation comes to fruition. This is an incredibly unlikely scenario. To begin with, due to the nature of politics, ideas get watered down as concessions are always made and the implementation looks very little like the original idea. But assume that it does happen. The reality of democracy is that eventually people you disagree with will get back into power. Plus, politicians—being as short-sighted as they are incentivized to be—are fickle beings so the same government could construct measures that reverse or weaken the wealth tax. A larger and more overbearing state is the outcome, not equality. A wealth tax—even if implemented perfectly—is a terrible idea for addressing inequality.
Focusing on the perceived wretchedness of inequality—in wealth or income—creates a distorted worldview that leads people, like Stevenson, to solutions that will neither solve the problem nor are they moral. It is not inherently an immoral circumstance for some to have a lot more than others. The immorality stems from the vast disparity being achieved through political means.
Stevenson correctly identifies that the central banks lowered interest rates—sometimes talking about the great expansions in quantitative easing too. This caused the ultra-wealthy to acquire access to cheap credit before the money could work its way through the system and devalue money more widely causing the assets that the wealthy bought to become very profitable purchases. However, Stevenson does not consider disposing of central banking or fractional reserve banking.
Instead, focusing on the inequality has led him down a path that beseeches him to address the inequality through more political, immoral means. Fixing a politically-caused problem with more political means is lunacy. A wealth tax theoretically may address the “stealing” that the wealthy have done, but the rich who acquired their wealth through political means will, at best, take the hit and then lobby for more QE so they can buy more assets because Stevenson pays no attention to the political means that allowed them to acquire such wealth. This thought process is akin to a man witnessing a child in distress as they are stuck in a room being filled with water from an open pipe. The man shovels water out of the room to help the child instead of shutting off the water pipe. Shut off the pipe and the inequality will stop worsening.
Rather disturbingly—when challenged by Camilla Tominey on BBC Question Time about the practicality of introducing a wealth tax—Stevenson replied, “Do you think China would allow someone to own billions and billions and billions of Chinese assets, and then move to Monaco and not pay tax on those assets?” The fact Stevenson chose China as his example is incredibly revealing.
China is a state that does not pretend to believe in private property rights. All property can be a Chinese government asset if they wish it to be. This is where the concept of “stealing” the wealth of the poor creates an alternate reality in the minds of left-leaning people. There must be a distinction between direct stealing and the government creating an environment where the ultra-wealthy can easily buy large quantities of assets. The latter has been the case for decades. You cannot have a property right over something you never owned in the first place.
Stevenson, in practice, believes this can be the case and that a policy that enforces this line of reasoning should be introduced. If you cannot move your assets where you would like, without a sizable chunk being seized, you never truly owned those assets. Expansion of private property rights smashed the centuries-long environment where only the rich and powerful could live life in luxury. A wealth tax would be yet another nail in the coffin of human flourishing.
Fleshing out the moral and economic arguments against a wealth tax from a libertarian perspective would further display the rotten nature of Stevenson’s ideas. Even giving the benefit of the doubt and the best-case scenario does not save the idea of a wealth tax. A wealth tax is just another extension of statism which is destroying British society. It will further serve to expand the state and distort the economic calculation. It will not address wealth inequality; it will not stop the central bank spigots from causing the inequality.
The politicians will be the lonesome winners of a wealth tax. Watch as they parade through the airwaves, talking a big game about how they took on the immensely unpopular ultra-wealthy elites while those same elites continue to line their pockets. Britain needs to take away the political means by which the rich manipulate the market to their advantage while holding back their less-well-off competitors. This will address the politically-imposed inequality rather than more interventionism.
