Editorial: Taxing Capital Gains
Lots of speeches have been made and articles written about the “unfairness” of stock exchange and property speculators having been able to buy shares or land or buildings, hold them for a while, and sell at a profit without paying tax on it. The people who see this as “unfair” do not think it “unfair” that the wealth the workers produce should belong to someone else.
Now the short-term speculators will have to pay tax, and we are being assured that this is a small step towards making the rich less rich and the poor less poor. Of course, it will have no such effect. America, which has for years had taxation of capital gains, has seen no lessening of the concentration of wealth. On the contrary, the inequality is as great as, or even greater than, it has ever been, and in nine years the owners of five million dollars or more have multiplied from 2,113 to about 10,000.
Wealth-ownership in Britain sheds even more light on the success of the propertied class in holding on to their own, for here, in the past 100 years, there have been many promises and campaigns to reduce inequality with no result whatever.
One of the advocates of a wealth tax, Mr. Samuel Brittan, writing in the Observer (April 8th, 1962). rejected in advance the idea of a mere capital gains tax. as one that “deserves to be laughed out of court,” and stated his case for something much more drastic. He based it on what he described as the “fantastically unequal distribution of wealth” in this country, and urged that there should be a regular annual tax on accumulated wealth itself, not just on the increase of it. He pointed out how easy it would be to collect such a tax because it need be levied only on the 800,000 people who own £20.000 or more and possess between them nearly half of the total personal wealth. (He also thought that the total of personal wealth and the inequality of ownership are probably even greater than the official figures show).
Each time someone like Mr. Brittan comes along to advocate a new scheme for reducing inequality he has to explain why earlier schemes failed. Mr. Brittan recalls the death duties, which in their day were supposed to do the trick, and tells us. what is indeed common knowledge, that death duties “have become a farce.” He quotes one example, the Ellerman fortune, but does not tell its interesting history.
In 1933 death duties reduced the fortune from £40 million to £18 million. By 1937 it had increased to the original £40 million and it is now reported to be about £100 million!
Other nostrums for dealing with inequality have included taxation of land values (in the Liberal Programme in 1892), supertax and surtax and taxation of company profits. There was, too, the movement for a “capital levy” after the first world war, favoured by Liberals. Tories, and the Labour Party, but dropped on grounds of administrative difficulties and probable disturbing financial effects.
If it had been imposed it would merely have been a transfer of wealth among wealthy persons, not a reduction of the wealth and income of the propertied class. And nationalisation in some muddled way was supposed by the Labour Party to have the effect of lessening inequality.
After all those years and all these “cures” capitalism exhibits just the same “two nations” that the Tory Disraeli described over a century ago.
One man who saw capitalism as it really is was the banker R. H. Brand (later Lord Brand) who in 1923, in a booklet “Why I am not a Socialist” wrote: “There has always been and there will always be inequality of wealth . . . nothing like equality can be attained without the abolition of the whole present system of wealth, ownership and production.”
As a wealthy man who prospered under capitalism his attitude was understandable. By the same token the working class should give up following futile schemes for achieving the impossible dream of an equalitarian capitalism. Their interest lies in establishing Socialism,