“The Labour Party has no serious plans for reforming Britain’s regressive taxation system. There will be no new property taxes or wealth tax. Nor will tax rates on capital gains – unearned income from increases in the value of property or financial assets – be raised to match those on wages.”

In ditching wealth tax, Labour is rejecting growth and embracing bad economics

In his article for The Guardian, Josh Ryan-Collins criticizes the Labour Party, particularly its shadow chancellor, Rachel Reeves, for their refusal to embrace property tax reform and wealth taxation. Reeves’ stance of maintaining the current taxation system, including not implementing new property or wealth taxes, is viewed by Ryan-Collins as a misguided political move that contradicts the party’s mission of fostering economic growth.

Reeves seems to endorse “trickle-down” economics, implying that lower taxes for the wealthy will stimulate economic growth for all, a concept widely discredited. Contrary to this approach, the Biden administration in the United States has opted for aggressive tax increases to support a significant fiscal expansion, leading to a robust post-pandemic recovery.

Ryan-Collins argues that the UK’s tax system encourages a form of “rentier capitalism” where capital gains are taxed less than income, leading to significant tax breaks for property ownership and housing investment. This incentivizes the accumulation of assets by private investors and property owners, rather than fostering productive investment, innovation, or infrastructure development. This structural issue contributes to the UK’s stagnant growth and low productivity.

The article also highlights the challenge of inflation, which can hinder Labour’s plans for increased public spending and green initiatives. To address this, Ryan-Collins suggests that taxing wealth and capital gains, particularly from the wealthy, can help mitigate inflationary pressures and allow wages for lower earners to catch up with the rest of society.

Notably, Labour’s stance on taxation contradicts the views of many economic institutions, including the OECD, IMF, Institute for Fiscal Studies, and the Financial Times, which advocate for higher taxes on property and wealth as a means to support public investment, reduce inequality, and promote economic growth. Ryan-Collins concludes that Labour’s position aligns with a minority of economists who still believe taxing wealth less than income can foster growth, a viewpoint that is increasingly isolated.

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