Will the rich leave the UK?

Summary

In this video, Gary's Economics tackles the myth that taxing the rich will cause them to leave. The host clarifies that the focus is on asset-rich individuals, not high-earners, who derive passive income from their wealth. He argues that taxing these wealthy asset owners is feasible and necessary to prevent wealth concentration and protect the middle class, emphasizing that the assets generating their income are immobile and inherently tied to the country's economy.

Takeaways

• 📈 The argument against taxing the rich based on their potential to leave is a common misconception.
• 💼 The distinction is made between the rich who earn from their work and those who earn from their assets.
• 🏦 Wealthy individuals with substantial assets, such as property and businesses, receive 'passive income' regardless of where they live.
• 🌍 The script emphasizes that the income of the asset-rich comes from the assets located within a country, making them technically taxable there.
• 🏘️ The wealthy often own the means of production and resources that everyday people rely on, indirectly profiting from the population's activities.
• 💼 High-income earners can move to different countries for tax benefits, but asset-rich individuals are tied to the assets they own.
• 🏛️ The current tax system in many Western countries is based on residence, allowing asset owners to avoid taxes by living elsewhere.
• 🇨🇳 The script contrasts Western tax systems with China's approach, which doesn't allow for asset ownership without taxation.
• 🌐 The script suggests that the tax system can be changed to tax based on asset ownership rather than residence.
• 💡 The importance of understanding wealth ownership and its impact on society is highlighted, with a call to action to protect the middle class and the poor.
• 🛡️ The script likens taxation to an army, necessary to protect a nation's assets from being monopolized by the very rich.

Q & A

What is the main argument presented in the video against taxing the rich?

The main argument against taxing the rich presented in the video is that if you tax them, they will leave the country.

Why does the video creator believe that the argument 'tax the rich and they will leave' is flawed?

The video creator believes the argument is flawed because it confuses the mobility of high-income earners from their work with the immobility of the ultra-wealthy who derive income from their assets.

What is the difference between rich people who are rich because of their jobs and those who are rich because of asset ownership?

Rich people with high-paying jobs can potentially leave for other countries with lower tax rates. In contrast, those rich due to asset ownership, such as billionaires, derive their income from passive assets regardless of where they live.

What type of income do the ultra-wealthy derive from their assets?

The ultra-wealthy derive passive income from their assets, which includes rent, dividends, interest, and capital gains, regardless of where they live.

How does the video creator suggest that the ultra-wealthy's income is connected to the average citizen?

The ultra-wealthy's income is connected to the average citizen through the assets they own, such as property, businesses, and natural resources, from which they collect rent, profits, and other forms of income.

What is the current tax system's approach to taxing individuals based on their residence?

The current tax system in many Western countries taxes individuals based on where they live, which allows wealthy asset owners to avoid taxes by living in tax havens while still earning from assets in their home country.

Why does the video creator argue that taxing the ultra-wealthy is technically easy?

The video creator argues that taxing the ultra-wealthy is technically easy because their wealth is tied to assets in the country, making it difficult for them to avoid taxes by moving elsewhere.

What does the video suggest about the role of taxation in protecting the middle class and the poor?

The video suggests that taxation of the ultra-wealthy is essential to protect the middle class and the poor from increasing inequality and potential societal collapse due to wealth concentration.

What historical precedent does the video creator reference for the successful implementation of wealth taxation?

The video creator references the post-World War II era in Western countries, where decent living standards, housing, education, and healthcare were provided to ordinary people due to policies that included wealth taxation.

What is the video creator's stance on the political influence of the ultra-wealthy?

The video creator believes that the ultra-wealthy exert significant political influence to avoid taxation and that this influence extends to media and economic narratives that discourage wealth taxation.

What is the video creator's final call to action regarding wealth taxation?

The video creator calls for continued campaigning and support for wealth taxation, emphasizing its necessity despite the acknowledged difficulty, to prevent societal collapse and protect the less affluent.

Outlines

00:00

💼 The Misconception of Taxing the Wealthy

Gary's Economics addresses the common misconception that taxing the rich will cause them to leave the country. The video clarifies that the argument is often based on a misunderstanding between the wealthy who earn high incomes from their jobs and those who derive wealth from asset ownership. The speaker emphasizes that the focus of taxing the rich should be on those with significant assets, not high-income earners who can potentially relocate. The video aims to debunk the myth that the wealthy will flee due to taxation and to highlight the difference between earning from labor and earning from passive income generated by assets.

05:04

🏦 Asset Ownership and Taxation

This paragraph delves into the concept of asset ownership as the primary source of wealth for the ultra-rich, who often receive passive income regardless of their place of residence. It criticizes the current tax system in Western countries that allows asset owners to avoid taxes by living elsewhere. The speaker argues that the wealth of a country, including land, buildings, and natural resources, is owned by a select few who profit from the rest of the population's economic activities. The paragraph calls for a reevaluation of who owns the wealth in society and suggests that taxing the owners of these assets is both feasible and necessary to prevent the concentration of wealth and the erosion of the middle class.

10:06

🌍 The Global Impact of Wealth Concentration

The final paragraph discusses the global implications of wealth concentration and the political influence of the rich. It points out that the wealthy often avoid taxation by claiming non-residency, despite their assets being located and generating income within the country. The speaker advocates for a change in the tax system to reflect the true source of the rich's income and to prevent the middle class from losing their assets to the wealthy. The paragraph also touches on the political challenges of implementing such tax reforms, suggesting that the wealthy may use their influence to maintain the status quo. The speaker concludes by emphasizing the importance of taxing the rich to protect society from descending into poverty and to maintain a fair distribution of wealth.

Keywords

💡Taxing the rich

Taxing the rich refers to the policy of imposing higher tax rates on individuals with higher incomes or wealth. In the video, the concept is central to the argument that it is both possible and necessary to tax the wealthy to prevent the accumulation of wealth and power in the hands of a few, and to maintain a balanced society. The script emphasizes that taxing the rich is not about penalizing success but about ensuring that those who benefit most from society contribute fairly to its maintenance.

💡Asset ownership

Asset ownership denotes the control over property, resources, or financial instruments. In the context of the video, it highlights that the ultra-wealthy derive their income not from labor but from passive income generated by their assets. The script uses examples such as owning buildings, properties, companies, and debt to illustrate how the wealthy extract income from the economy regardless of their physical presence.

💡Passive income

Passive income is income earned with little to no effort by the recipient, often generated from investments or assets. The video explains that the rich derive their wealth from passive income, which contrasts with active income earned through work. It is a key point in arguing for the necessity of taxing the rich, as this income is seen as inherently tied to the economic activity of others.

💡Wealth inequality

Wealth inequality refers to the uneven distribution of assets and wealth among different social classes. The video discusses wealth inequality as a growing problem, where the rich accumulate more assets at the expense of the middle class and the poor. The script argues that taxing the rich is a way to address and potentially reverse this trend.

💡Tax mobility

Tax mobility is the ability of individuals or businesses to move to jurisdictions with more favorable tax laws. The script contrasts the mobility of high-income earners, who can work in different countries, with the immobility of the wealthy who derive income from assets tied to a specific country, making them easier to tax regardless of their residence.

💡Political capture

Political capture is a situation where the state's policies are heavily influenced by powerful interest groups, often to the detriment of the public interest. The video suggests that the wealthy have captured the political system to avoid taxation and maintain their wealth, influencing both politicians and the media to propagate the idea that taxing the rich is not feasible.

💡Middle class

The middle class refers to a socio-economic group that falls between the working class and the upper class. The script discusses the middle class as a crucial part of society that is losing wealth and assets to the rich, which threatens their stability and the overall health of the economy.

💡Debt

Debt is an obligation owed by one party to another, often in the form of loans or mortgages. The video mentions increased debt as a mechanism through which the middle class and the poor lose assets to the rich, as they become indebted to wealthy individuals or entities that own the debt.

💡Tax system

A tax system is the method by which a government collects revenue from its citizens. The script criticizes the current tax system in many Western countries for being based on residence rather than source of income, allowing wealthy asset owners to avoid taxation by living in tax havens while still earning from assets in their home country.

💡Economic activity

Economic activity refers to the actions and behaviors that contribute to the production, distribution, and consumption of goods and services. The video emphasizes that the economic activity of ordinary people generates income for the wealthy through their asset ownership, making it essential to tax the rich who benefit from this activity.

💡Social collapse

Social collapse refers to the breakdown of a society's social, economic, and political structures. The script warns that without measures such as taxing the rich, societies may collapse into poverty and inequality, as the concentration of wealth leads to the erosion of middle-class stability and public services.

Highlights

The video addresses the common argument against taxing the rich, stating they will leave if taxed.

The channel has received numerous comments claiming that taxing the rich is impractical due to their potential to relocate.

The speaker clarifies that when discussing taxing the rich, they are referring to those with significant asset holdings, not high-income earners.

The distinction is made between the wealthy who earn from labor and those who earn passive income from assets.

The speaker emphasizes that asset-rich individuals derive their income from the assets they own, which are often the result of societal contributions.

A critique of the current tax system is presented, highlighting its failure to tax wealth based on asset ownership regardless of residency.

The video argues that the rich, through asset ownership, are inherently tied to the country they extract wealth from, making them easy to tax.

The speaker suggests that the middle class is losing wealth to the rich, leading to increased inequality and potential societal collapse.

The video advocates for viewing taxation as a means of protecting society from the concentration of wealth, similar to an army defending against foreign invasion.

The speaker calls for a change in perspective on taxation, emphasizing its necessity for maintaining a balanced society.

The video discusses the political influence of the wealthy, suggesting that they shape narratives against their taxation.

The argument is made that taxing the rich is not only possible but essential for preventing societal inequality and poverty.

The speaker challenges the notion that taxing the rich is impractical, asserting that it is a matter of political will.

The video concludes by urging viewers to support the campaign for wealth taxation as a crucial measure for societal protection.

A call to action is made for the new government to consider practical measures to prevent the increase in inequality.

The video ends with a reflection on the importance of difficult but essential actions taken by previous generations to secure societal benefits.

Transcripts

Welcome back to Gary's Economics.

Today we are going to talk about

if you tax the rich, they’ll leave.

We have done a video on this channel

about whether it is possible to tax the rich before.

I did it about a year ago.

I went and watched it before I did this video.

And the reason I watched it is

because we have been getting tons

and tons and tons of comments,

which is you can't tax the rich they’ll leave.

You can't tax rich they’ll leave.

It is by far the most popular comment on the channel.

It's the most frequent criticism

to whether you should tax the rich.

So I didn't want to do a video

because we'd already done one before,

but I went and checked and it's only got 10,000 views.

And obviously since then the channel has grown a lot.

We've got a lot of new people.

This is clearly the number one concern

about why we cannot tax the rich.

So I wanted to do a video, deal with it head on.

And explain really, really clearly why we can

tax the rich.

Okay.

So this argument

that we cannot tax the rich because they’ll leave

is basically based on a confusion

between rich people who are rich

because they have a good job

and they make money from their work,

and rich people who are rich

because they own a lot of assets.

Now, ordinary people don't have great visibility

with regards to extremely wealthy families, families

who have

asset hoardings of £10 million, £100 million, £1 billion.

So ordinary people,

when they think of the rich, they tend

to think of people with good jobs

doctors, lawyers, bankers, businessmen,

people who might earn 100, 200,

maybe even more thousand pounds a year.

and these people,

if you tax them, in many cases, they can leave.

I was a trader for a long time.

I made a lot of money when I was doing that.

I paid a lot tax,

but if I wanted, I could have gone to work in

most famously Singapore, which has a lower tax rate.

So it's possible for people who

have very high incomes from their work to leave

because they get their money from their work

and they can work anywhere in a higher

tax country or a low tax country.

When I talk about taxing the rich,

I'm not talking about these people.

And I want to make it very clear from the start.

I said it a lot of times on the channel,

but I think some people still don't recognise it

when I talk about taxing the rich.

This is not about highly paid workers.

This is about individuals and families

that have tens

or hundreds of millions of pounds or dollars in assets,

maybe even billions of pounds or dollars in assets.

These are the people I want to tax.

Now, when we consider a billionaire

or somebody worth, let's say, £1 billion or £100 million,

they do not get their income

from working in the vast majority of cases. If you are,

say Rishi Sunak who’s worth £700 million, he owns assets,

he owns assets, this is, he owns buildings,

he owns properties, he owns companies,

he owns debt, for example

he owns your mortgage, he owns the government debt.

This is what rich people own.

They get their income as what is considered

passive income.

They get it whether they work or not

because it doesn't come from the work,

it comes from their assets.

And what this means is it comes essentially from you.

They own your house,

they own the supermarket you shop in,

they own the fields that produce the food that you eat.

They own the natural resources

which produce the electricity you use.

They own the office block that you work in.

They own your mortgage, they own the government debt.

So when you pay taxes, it goes to them.

If you don't understand this concept of what wealth is

and what wealth ownership is, I really recommend

you watch the video on the channel called What is Wealth.

We also,

I think we're going to put this out the week

after we do a new video explaining really clearly what wealth is.

So this is the difference

between somebody who works for their money

and somebody who owns for their money.

Working people can leave and work in another country.

But if I own £1 billion

of UK government bonds or £1 billion of UK property,

regardless of whether I live in the country or not,

that money is coming from you,

when you pay your rent and you when you pay your taxes.

Rich people who are rich,

rich through asset ownership, asset hoarding,

they get their money from you.

So this is the key thing to understand, right?

I'm not talking about taxing working people.

I'm talking about the people that own the assets.

They own the assets of this country.

They own British assets.

They own the land. They own the buildings.

They own the companies. They own the debt.

They own British assets.

So let's talk about these people. Can they leave?

So at the moment

we have a tax system in this country

which is common in western countries.

It's same in Western Europe, it's the same in the US,

which taxes you based on where you live.

And what that means is I could go into France

if I was a billionaire and buy

€5 billion

worth of French property of French businesses,

and then I could leave,

I could move to the Cayman Islands,

and I could take loads of French rent payments, French

mortgage payments,

money from French customers

and basically pay no tax on it.

Because even though I own half of France

or half of Britain or half of the US,

I don't live in those countries, so I don't pay tax.

And this is basically,

a completely absurd tax system,

which we don't have to use. Not every country does this.

China doesn't

allow you to own half of China

and not pay any tax on the money

that you extract from Chinese people,

because you don't live in China.

Other countries don't allow this.

We do allow this but we don't have to.

The basic fact is,

if you own a tonne of British assets,

be that

companies that sell to British

consumers, British homes, British debt,

British land, British natural resources,

your money comes from Britain.

And that would be the same if I was talking about the US,

if I was talking about Australia,

if I was talking about Germany or France,

you exist in a country that has real assets.

Those assets are owned by somebody.

And whenever you use those assets,

you pay that person and the money comes from you.

So this is the big reason why

the very richest people in society

are actually the easiest technically to tax

is because, if I'm a teacher or a lawyer or a doctor,

I can go to Dubai, I can go to Singapore

and I can work in those countries

and I generate the money from my work.

If I'm rich and I own your country,

whether I leave or not, my money still comes from you

and it's...

I’m the least mobile person in the world

from a tax perspective.

Because whereas a worker can move

and work in another country,

the owners of the assets,

they all your country

and of course your country can decide

whether to tax them or not.

So I think once you understand this difference,

that taxing the rich,

when I use

it, is not about taxing working people,

it's about taxing the owners of the wealth.

I think what you can recognise from

that is the fundamental question we are dealing with here

is who owns your country?

Who owns the wealth of your country?

Look around you in the place that you live.

Look around you in the country that you live.

Look at all of the land.

Look at all of the buildings.

Look at all of the property.

Look at all of the productive buildings and machinery

and all of the natural resources.

Somebody owns that.

Who do you want to own it?

We are in a state of transition in the West,

where we used to have a large middle class

that owned a lot of the wealth.

They are losing that

through increased debt

and through decreased

direct ownership of things

like property, things like the stock market,

which are increasingly being owned by wealthy people.

If you allow the very rich

to own the wealth in your country,

claim that they don't live in your country

so that they don't pay tax on your country,

despite the fact

that all of the people in your country are paying their rent,

are paying their mortgages, are paying company

profits to these people,

it is inevitable that they will accumulate

more and more of your country,

and eventually you will lose your middle class.

And this is the reason that we do

everything on this channel.

And I think there's a kind of absurd thing

that happens here where,

I say tax the rich to protect the workers.

And very,

very rich people pay a lot of money

to pay a lot of people to tell you,

Gary wants to tax you.

The reality is,

unless you're a very rich person,

if you are part of the middle class

or even poorer than the middle class in your country,

you are losing your assets to the rich.

And the rich are not paying tax.

And I really think we need to start viewing tax

really, in the same way that we view an army.

The reason that countries have armies is to stop

foreign invaders from coming in

and taking all of the land and taking all of the assets.

That is happening.

It is happening now.

The middle class are losing their assets to the rich.

We can see that in decreased homeownership rates,

in more increased ownership of the stock market,

in much higher levels of debt from ordinary families

and from governments to the rich.

You are losing your assets.

You are losing your assets

and you are competing with people

like Rishi Sunak, who have passive incomes

of £1 million a week,

and there is no way for you to compete with them.

What they own is your assets.

They own your house.

They own the building you work in.

They own the building you shop in.

They own the bar.

They own the restaurants. They own the natural resources.

All of those things exist in your country.

They exist in your country, and you can tax them.

We don't tax them because in many cases

we have a very, very wealthy political class

that is funded by them

and just simply told you that we can't, but we can.

We can.

China does it.

Lots of countries have done it in the past,

but at the moment we have...

basically, I would argue there’s

a degree of political capture,

where the very rich not only influence

the politicians to not tax them, but to tax you instead,

but they also influence the media and the economists

to tell you that it's impossible to tax them.

Listen, these guys are not magicians.

They can leave the country.

The assets are here. We don't need them.

We need their assets.

It's about ownership of the assets.

It's about ownership of the country you live in.

Now, I want to be clear

when I say that it's possible to tax them.

That is 100% true because we don't need...

These are people who don't want we don't need the labour.

What we need is their assets.

The assets

exist in this country

or in the country, in the West where we live,

we can tax them.

That doesn't mean it's going to be easy.

I don't think it's easy.

I think it's going to be really, really hard.

But I don't do it because it's easy.

I do it because I think it's important

that my country and your country, whichever country is,

doesn't collapse into desperate poverty.

And the only way to protect the middle class

and the poor from the rich is taxation.

Just like the only way to protect you from

foreign armies is an army.

We don't have the taxation,

and we are moving back towards being a very unequal,

very high poverty society.

I campaign for taxation of the rich.

Not because it is easy, but because it is essential.

And, we are going to move into a period now

where we have a change of government in this country.

And if I'm totally honest,

I think that the previous government,

you know,

the Prime Minister is worth £700 million,

David Cameron made £10 million

in a year of leaving office.

They all went to the most elite private schools

and come from wealthy families.

I think that that government

was basically aggressively

protecting the class interests of the rich.

And, I don't think they ever would have given us

what we need in terms of stopping

the increases in inequality.

But we're going to move now into a period

of having a government which, rather than saying

we don't want to stop inequality increasing,

they will be saying it would be nice

to stop inequality increasing,

but it's not practical

or it's not sensible or it's too difficult

or it's not worth the effort.

Personally, I think it is worth the effort to stop

your societies from collapsing into desperate poverty.

and it's not easy, but it's essential.

And I think sometimes it's important

for people to try to do things that are difficult

because they are essential

to stop the collapses of their societies.

And previous generations did things like that.

And it is through the work of those previous generations

that I live in a country

which for a long time provided decent living standards

and housing and education

and healthcare to ordinary people.

That's not normal.

In most of the world

ordinary people don't get good quality

housing and education and healthcare and leisure time.

But we had it here in the UK and we had it in the US

and in Europe and Australia and Japan

for 50, 60 years

because people fought for it,

despite the fact that before they had it,

it had never happened before in modern society.

Taxing the rich will be very, very difficult.

It's possible these people are not magicians.

These people are not Gandalf.

They can't magic themselves

out of the country and disappear

all of the wealth out of the country.

The wealth is here. It is the wealth of our countries.

But if we allow it to be held

by a small group of extremely wealthy families

who pretend they live

in the Cayman Islands and pay no tax,

then we and our kids

and our grandkids will live in poverty.

So it's difficult, but it's possible.

I want to do it.

I'm going to keep campaigning for it

and I hope you support us on this channel.

This is the big question we can ask all the time.

Can we tax the rich?

Okay, it's not about working people.

It's about the people who are hoarding our assets

and stealing our countries. The assets are here.

The wealth is here. We can tax it. Thank you.