Wealth Taxes Are the Obvious Revenue Target for Reeves

It’s a question of when, not if, the UK’s Labour government unfurls the tax increases needed to plug a yawning budget deficit. Chancellor of the Exchequer Rachel Reeves has ruled out higher income or sales taxes, which contribute three-fifths of the total tax take, so it looks inevitable that accumulated wealth will have to be targeted instead.

That’s why it’s crucial for the chancellor to keep in mind not only fairness, but incentives. There are areas ripe for the picking but others where she should avoid raising taxes, especially on the 5.6 million small businesses that need nurturing.

Her primary objective should be to address the meaning of personal income, which can be arbitrarily redefined as a capital gain, without unduly deterring investment. Income earned off assets needs to be taxed appropriately, so businesses not only survive, but thrive. A key principle of fiscal policy is the famous Colbert doctrine: plucking the goose so as to obtain the largest possible amount of feathers with the least amount of hissing.