A wealth tax would not only solve the cost of living crisis but also tackle other major issues facing the UK such as reducing wealth inequality and national debt. It is therefore the best possible solution.

1) Wealth Inequality - Wealth inequality has been growing since the 1980s. The UK’s top 1% are now wealthier than 70% of the population combined, highlighting the severity of the issue and the huge opportunity a wealth tax offers. Harnessing this wealth would be the most effective way to bridge the gap between those hardest hit by the cost of living crisis and the very wealthy. 

2) Fair Taxation - The government’s primary tax revenues come from Income Tax and National Insurance, levied on hard work and VAT, which disproportionately affects poorer households. Meanwhile, wealth remains relatively untaxed. As a result, the public overwhelmingly agrees that a wealth tax is one of the fairest ways to raise much-needed funds to support public services and alleviate the pressures of the cost of living crisis.

The public overwhelmingly agrees that a wealth tax is one of the fairest ways to alleviate the cost of living crisis

3) Government Revenue - A wealth tax could generate £70-130 billion annually, even after accounting for administration costs and evasion. This could fund public services and support those affected by rising costs or help reduce the national debt. In light of the UK’s enormous debt and cost of living crisis, the potential revenue that a wealth tax could generate is too substantial to forgo.

In a world where there is increasing economic inequality and a small number of elites hold vast amounts of wealth, the argument in favour of a wealth tax to address these inequalities will only get louder. However, this isn’t the best way to end the cost of living crisis. Its impracticality means other solutions are better.

1) Impracticality - A wealth tax is not as simple as obliging the wealthy to pay a percentage of their wealth. Valuing their assets is incredibly difficult and will inevitably cause conflict over how much the wealthy pay as valuing a painting or a house is not as easy as taxing income. Plus, the huge administrative costs associated with assessing people’s wealth offset much of the increased revenue so other solutions are more efficient.

2) Disincentives - Thousands of individuals and businesses evade their taxes so a wealth tax would only make this problem worse. It would be better for the government to focus on closing loopholes that make tax evasion possible. Additionally, a wealth tax would disincentivise wealth creation and entrepreneurship because it would encourage people to move to countries with more friendly conditions for doing business rather than remaining a UK taxpayer.

A wealth tax would disincentivise wealth creation and entrepreneurship

3) Better Alternatives - A key flaw in wealth taxes is that they tax the assets that people own at one time, meaning savers are punished while those who spend their assets aren’t. This isn’t fair, meaning reform to various forms of income tax is a better solution. One off wealth taxes can also be anticipated so it would be better to tax as income is earned, limiting people’s ability to tie wealth up in illiquid assets.