This motion proposes a range of progressive reforms to wealth taxation in Britain, to combat inequality and raise revenues for public services and investment.
It notes that wealth is extremely unevenly distributed in the UK, with 45% of UK wealth owned by 10% of households and just 9% owned by the bottom 50%. It observes that while UK wealth has more than doubled as a share of GDP over the last 60 years, wealth taxation as a share of GDP has not increased over the same period.
The motion argues that wealth inequality is economically and socially damaging, and is contributing to a growing intergenerational, geographical and class divide. It calls for the tax system to play a greater role in promoting a fairer distribution of wealth.
The motion subsequently proposes various progressive reforms to the taxation of capital gains, dividends, inheritances and residential property, as well as limiting tax relief for higher earners’ private pensions. It suggests allocating the revenues from higher wealth taxation to a mixture of lower taxes for young people and low earners, investment in infrastructure and public services, and the creation of a Citizens Wealth Fund.
Conference notes that:
- Wealth is extremely unevenly distributed in the UK, with 45% of UK wealth owned by 10% of households, and just 9% owned by the bottom 50%.
- Wealth inequality is twice as severe as income inequality, as measured by the Gini coefficient.
- Between 2010 and 2014, over half of the net increase in wealth was received by the top 10% of households.
- Although UK net wealth has increased from around 300% to almost 700% of GDP over the last 60 years, wealth taxes bring in revenue worth only around 4% of GDP, the same proportion as in the mid-1960s.
- Wealth inequality is expected to worsen in the coming years, due to stagnant wages and rising debt, automation, growing numbers of young people unable to get on the housing ladder or save for the future, and an increasing flow of inheritances.
- Liberal Democrats have long advocated for raising a greater share of tax revenue from wealth, and have previously called for reforms to inheritance tax, capital gains tax, pension tax relief and property taxation to achieve this.
Conference believes that:
- Wealth inequality and the concentration of economic power are economically and socially damaging.
- Britain's deepening wealth gap rigs society in favour of those with substantial wealth and those able to inherit it, and has contributed to a growing intergenerational, geographical and class divide.
- The Liberal Democrats should embrace the prosperity and innovation generated by the market economy, but also recognise its tendency to concentrate resources and power among a minority.
- Capitalism has only thrived thanks to the bold reforms - such as the welfare state and the breaking-up of monopolies - of liberal visionaries; these are needed once again if it is to survive the 21st century.
- The tax system must play a greater role in promoting a more equitable distribution of wealth; taxation reflects the fact that wealth creation is reliant on public goods such as infrastructure and a healthy, educated labour force.
Conference notes the proposals in the spokesperson's paper, Promoting a Fairer Distribution of Wealth, and calls for:
- Equalising the tax treatment of income from wealth and income from work by: abolishing the separate capital gains and dividend tax-free allowances and instead taxing these through the income tax personal allowance; aligning capital gains and income tax rates while introducing a basic inflation or "rate of return" allowance; abolishing capital gains forgiveness at death, which creates an incentive to hold on to assets to avoid paying tax.
- Streamlining the taxation of intergenerational transfers by: abolishing inheritance tax and instead taxing recipients at income tax rates and bands of ś250,001 to ś500,000, ś500,001 to ś1 million, and above ś1 million; ensuring that all transfers - not just those made at or near the giver's death - are subject to tax; giving each person a generous ś250,000 lifetime tax-free allowance, and exempting small annual gifts below a specified amount and all transfers to spouses and charities.
- Reforming the current regressive system of pension tax relief by: introducing a flat rate of 25% on pension contributions and abolishing employee National Insurance payments on those contributions, substantially boosting incentives to save among lower earners while reducing relief for higher earners; limiting the current tax-free lump sum people can withdraw from their pension pots from 25% to ś40,000, reducing tax relief for the wealthiest pensioners while leaving 75% of drawdowns untouched.
- Making the taxation of residential property fairer by: immediately introducing additional higher bands to make council tax more progressive; reviewing the case for replacing council tax with a simple percentage-based annual property tax based on up-to-date valuations, as is the case in most other developed economies and as recommended by the OECD, Resolution Foundation, IFS and IPPR.
- Revenues from higher wealth taxation to be allocated to a combination of: lower taxes for young people and low earners; increased investment in infrastructure and education; an independent, professionally managed Citizens' Wealth Fund, which by investing in assets would earn an annual rate of return that could be used to boost public spending or be returned to citizens in the form of an annual dividend.
Applicability: Federal; except 4 which Is England only.