Leaked Microsoft memo tells managers not to use budget cuts as an explainer for lack of pay rises: ‘Reinforce that every year offers unique opportunity for impact’::Managers are being ordered to dodge employees’ questions about how the latest budget cuts will impact their pay.
Taxing the wealth was tried numerous times all over the world since Ancient Rome and it NEVER worked. Recent example is that in 1990 12 OECD countries had wealth tax, only 5 have it these days. More info here.
So the only two option you have is to either increase income tax or VAT. Income taxes do not affect the rich as they rarely have any income and live off their wealth and dividends. Increasing VAT will also disproportionately affect the poor. This is why I said that taxes will just kill off the poor.
What’s the solution? Increase base rates! Yes, they do affect mortgages of home owners from lower and middle classes, but they affect the rich a lot more. Let me explain.
So, let’s rewind a few years back when rates were super low. Imagine you’re rich, live in London and you either own your £20m house outright or you have a mortgage, but your equity is high, like 50%+. Now you don’t have an income, but you need £50k cash for pocket money and you also want to buy a new car for £150k. You don’t want to sell your equities and stocks, that’s just dumb. And you don’t want to buy a car through financing because interest rates will be high like 8% or so. Plus financing won’t give you a deposit and £50k pocket money. So what do you do? You remortgage your house, lower your equity by £200k, you get an interest rate something like 1.2% and you pay zero bloody taxes. And you get £200k cash in hand to buy your car outright.
But now the governments all over the world are increasing the rates and you can’t remortgage your house at 1.2% anymore. Now your interest rate will be 8% for example. Now you will be losing quite a lot of money if you do so. So will you remortgage? I won’t in their shoes. I would rather wait for a bit for the markets to calm down. And those who can’t wait will inject quite a bit of money into the state budget.
So, to sum things up. Taxes affect the poor, base rates affect the rich. What needs to be done additionally is a safety net for home buyers from low and middle classes to help them out during these times. This is the bit that’s missing, not taxes.