Gary Stevenson is wrong about wealth taxes

I was overwhelmed by envy of my wife the other day when I discovered that she had never heard of Gary Stevenson. Maybe it’s the algorithms but I’ve been unable to escape him recently. In case you’re in the same happy position as my missus, Stevenson is a former city trader who claims to be “one of the best, if not the best, inequality economists in the world”, a boast that Thomas Piketty, Gabriel Zucman and Sir Angus Deaton might take issue with. He is best known for his advocacy of a wealth tax and for dressing like a 16 year old scally despite being a 39 year man. His YouTube channel — Gary’s Economics — has 1.6 million subscribers and he has been doing the media rounds again this week to promote his Channel 4 documentary How To Get Filthy Rich, an hour long advertisement for wealth taxes.

I try to keep an open mind and listen to different points of view, but I can see no benefit in Stevenson being given a platform to speak his brains to the nation. The economic illiteracy of the general public is woeful enough without this dubious character spoon-feeding them falsehoods and false hope. There should always be a place for bad ideas to be debated, if only to be challenged and debunked, but I see nothing to be gained from allowing someone to perform a gish-gallop of nonsense on television just because they were on the right side of a trade fifteen years ago.

Attempting to align what Stevenson says with reality is time-consuming and futile

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Stevenson routinely confuses wealth with income and revealed a staggering ignorance of the tax system in an interview with the businessman Daniel Priestly last year. For someone who talks almost exclusively about taxing wealth, this is not a good sign. A lot of what he says is simply gibberish. He recently claimed that “government wealth has gone from plus 100 per cent to negative 100 per cent of GDP”. I have no idea what this means. I can’t even guess what he thinks it means. Speaking to Piers Morgan this week, he claimed that the UK government handed out a trillion pounds during the pandemic which ended up in the pockets of “the richest people in society”. Again, it is difficult to know what on earth he is talking about. The government spent £380 billion dealing with COVID-19, most of which went on the health service, the railways, vaccines, testing and PPE. So what does he mean? Perhaps a clue lies in a video he made in June 2020 when he noted that the Bank of England had recently created £300 billion from Quantitative Easing (QE) which he claimed, incorrectly, was being mostly used for furlough payments. He thought that these furlough payments would trickle up to the rich and make them richer. If I had to guess, I would say that he has rounded up the £895 billion created through QE since 2009 to a trillion pounds and imagined that it was all spent on furlough, the total cost of which was actually £70 billion. 

Attempting to align what Stevenson says with reality is time-consuming and futile because neither he nor his audience seem to care much about the truth. Stagnant economies foster the belief that economics is a zero-sum game and that someone is stealing from them. This makes them a breeding ground for populists and Stevenson has occupied the left flank by reviving some ancient socialist tropes. His basic thesis is that the rich are getting richer and so the poor must be getting poorer, and since this is bound to continue it means that all but the richest people will be very poor indeed in the foreseeable future. It is an apocalyptic distortion of the theory of inequality popularised by Thomas Piketty a decade ago and resembles the discredited immiseration theory of Karl Marx. His solution is a 2 per cent tax on the wealth of people who have a net worth of £10 million or more. Unless this happens, he predicts Dickensian levels of poverty in which all but the very rich are literally homeless (I am not exaggerating; he said exactly that on Channel 4 News this week).

To date, this theory has not held up terribly well against the facts. Between 2007/08 and 2023/24, the disposable incomes of the bottom decile (i.e. the poorest tenth of households) rose by 5 per cent in real terms. This is historically sluggish growth which reflects historically sluggish GDP growth, but the point to note is that the disposable income of the top decile did not grow at all. Indeed, it fell by 5 per cent and the top decile was the only part of the income distribution that was still below the level seen before the Great Recession. In other words, the rich have got a bit poorer and the poor have got a bit richer. Income inequality has fallen significantly since 2008 and by 2024 was at its lowest level for a quarter of a century.

Wealth inequality is low by international standards and the share of wealth held by both the richest 10 per cent and the richest 1 per cent has barely changed since 1980 when it hit an all-time low. If there is a perception of growing economic inequality, it is because most people’s living standards have improved at a barely perceptible pace for the last two decades and they are aware of a few high profile billionaires, nearly all of whom live in the USA. If people believe that there has been spiralling inequality in Britain since 2008 it is not because of the objective evidence because the likes of Stevenson have repeatedly told them so.

This is not to say that the economy is in good shape. On the contrary, it is dire. But it is not the state’s reluctance to distribute the proceeds of growth that is the problem, rather it is its failure to deliver growth in the first place. Two-thirds of all the private wealth in Britain is tied up in housing and pensions. The poor have a very small share of this, but so do the super-rich. The real divide is between those who own their own home and those who don’t. Stevenson strikes a chord when he complains about the inability of millions of working people to be able to buy a house, but this is the fault of successive governments restricting the supply of new housing and has nothing to do with the tiny, dwindling number of billionaires who live here. 

It is easy to portray those who oppose a wealth tax as being bootlickers for the haves and the have-yachts, but the reason most economists are dismissive of such taxes is the same reason governments on both the left and right have abandoned them over the years: they are costly to administer, don’t raise much money and drive talent out of the country. Stevenson got into an argument with Piers Morgan this week when each of them challenged the other to publicly declare how much they are worth. Both of them admitted that they didn’t know exactly, at which point my colleague Kristian Niemietz pointed out that this illustrates one of the problems with a wealth tax. The money of the rich is not sitting in a bank account. It is invested in shares whose value changes by the second and can spike or collapse dramatically overnight. It is invested in property and possessions, the value of which is not known until they are sold. And, in the case of many people who technically own £10 million or more, it is the value of the businesses that they founded and own, the price of which is also not known until they are put up for sale. Elon Musk did not suddenly get richer when Space-X was floated on the stock market; he merely converted one form of wealth (his business) into another form of wealth (cash and stock).

The first task of a government that wants to introduce a wealth tax is therefore to calculate how much wealth people have, but this is an expensive and bureaucratic exercise requiring many arbitrary decisions that would be open to challenge from those who are assessed. We haven’t evaluated the value of houses for Council Tax since 1991 because it is such a costly and time-consuming business. There are far more houses in the UK than there are people who are worth £10 million, but there are still many thousands of the latter and they would have to be assessed every year. 

Relying on a tiny tax base of individuals who can leave at any moment is not a sensible way of keeping the public finances on an even keel

Assuming that the government could be bothered to do all this, it would then face the obvious problem of capital flight as the rich leave the country. This happened in Britain in the 1970s when it was difficult to find a British movie star or rock band that was domiciled in the land of their birth. Sean Connery was in France, David Bowie was in Berlin, John Lennon was in New York, Roger Moore was in Monte Carlo, Marc Bolan, Rod Stewart, Michael Caine and Ringo Starr were all in Los Angeles. The list goes on and it includes many lesser known businessmen whose absence did more economic damage to Britain than the Rolling Stones did by hiding out in Villefranche-sur-Mer. Britain has recently had a taste of this again thanks to Rachel Reeves’ changes to non-dom rules and inheritance tax. A wealth tax would make it much, much worse.

Relying on a tiny tax base of individuals who can leave at any moment is not a sensible way of keeping the public finances on an even keel. In 1990, twelve OECD countries had a wealth tax. Today, there are only three. Norway and Switzerland use them as substitutes for inheritance tax and capital gains tax respectively, while Spain’s wealth tax is “so full of holes that what remains of it can be considered largely symbolic; it raises so little revenue that most fiscal accounts do not even bother to list it.” The countries that have abandoned wealth taxes did not do so because they are hotbeds of neoliberalism — they include Finland, France and Iceland — but because they raise very little money and have distortionary effects on the economy that aren’t worth the effort. It’s not about ideology. If you want to tax the rich, it is simply more practical and effective to do it by using income tax and capital gains tax when they make money, rather than trying to tax assets.

What does Gary Stevenson know that the leaders of these countries don’t? Nothing. He is a blowhard selling easy answers to the gullible and ignorant and he changes the subject whenever he is challenged on the facts. A wealth tax wouldn’t even work on his own terms. He claims that living standards are going to “absolutely collapse” and that there will be “desperate poverty for the vast majority” if a wealth tax is not introduced. He claims that “the welfare state will be shut down” and “the NHS will go”. “Britain is finished”, he says, if we don’t do what he wants. Millions will be living in cardboard boxes and dying of tuberculosis. So how he is going to prevent this dystopia? With a wealth tax which, if his own insanely optimistic projections are correct, will raise £24 billion a year. That would be 1.7 per cent of government spending in 2025/26. It would pay the interest on the national debt for two months. And a wealth tax would raise nothing like £24 billion anyway, not in the first year and certainly not in the second. This is not a serious policy and Stevenson is not a serious person. He is wasting our time.