How to raise £30 billion for the NHS

Revenue from taxing "capital gains" is tiny compared to taxes on wages

According to a new report by Alec Haglund of the Intergenerational Foundation, £30 billion each year of extra social spending could be covered just by taxing unearned income (from dividends, sales of assets, rents, etc.) at the same rates as wages.

Haglund's calculations do not even consider taxing wealth as such, just taxing income from wealth.

The nett cost of granting the junior doctors' 35% pay catch-up demand all at once would be about £1 billion a year (nett meaning cost to the government of higher wages minus increased income to government from taxes paid on those higher wages). Something like the deal accepted by the Scottish junior doctors (12.4% this year, plus commitments to catch up over time) would cost a few hundreds of millions.

It's all "rounding error" compared to the £30 billion. The real reason for the Tories' stubbornness against public service pay rises is that they want to use the economic turmoil to strengthen profits as against wages, and the real reason for Labour equivocating is that the Labour leaders don't want to annoy capitalists.

Someone on £60,000 a year all from dividends pays a 10.8% effective tax rate, while a graduate on £35,000 pays 22.5% including their student loan repayment. The £60,000-a-year person is still on a lower rate (18.7%) if their income is all from rents on property they own.

Unearned income has lower tax rates than wages, and higher tax-free allowances.

The disparity is growing. Income from gains on selling assets was £80 billion in 2020-1, but little over £20 billion in 2007-8. The tax take from that income was £12 billion in 2020-1, little up on the £8 billion in 2007-8.

More and more, top bosses are paid in forms which enable them to classify the income as "capital gains" rather than as "wages".

The rising trend of income from wealth, as against income from work, was one of the themes of Thomas Piketty's book Capital in the 21st Century (2014).

Socialists seek to make major wealth publicly-owned and democratically-controlled, so that production can be geared to the welfare of all, and ecologically sustainable. While we are gathering strength for that demand, the modest call for taxing unearned income equally is also useful.