David T Breaker: Taxing wealth is fundamentally unconservative

From David T Breaker.

A war is being waged in the Government. That isn't new, in fact it isn't new for any government anywhere in history, but the latest front has seen new dividing lines cut through parties and the old factions as much as between them. On the one side stand what were described in yesterday's Times by Rachel Sylvester as the "Economist Conservatives" - as in The Economist newspaper, and counting among them the Chancellor George Osborne - who have come to a bizarre alliance with the Liberal Democrats in their desire to tax "wealth"; facing against them stand 'Country Life Conservatives', a group said to include David Cameron, who oppose such a move as an assault on conservative values such as home ownership. With the budget just two weeks away, the issue hard to compromise on, and Liberal Democrats demanding a Mansion Tax in exchange for abolishing the 50p tax rate, tensions are set to rise considerably.

On the one hand I can see much good from this: I've long supported the idea of shifting taxation to whatever collection method causes the least economic harm, recognising the psychological impact and how they differ, etc, and if the government - and the media - start to discuss the damaging effects of taxation and the concept of making changes to reduce that impact then that could be a very good thing. We successfully shifted taxation away from income to consumption in the 1980s, and although I'd rather shift taxes only in addition to hugely cutting the overall tax level across the board - does that make me a CityAM Conservative? - this is at least a start.

There is however a problem. I'm all for changing the tax code, moving the burden of tax to the areas they cause least harm in order to cut (ideally abolish) the taxes that cause the greatest harm, but along the route something has gone terribly wrong. Close contact with the Liberal Democrats has infected some Conservatives with the belief that "unearned wealth" exists, and that it should be taxed, which are both very unconservative stances and likely to alienate millions of voters.

Now it would be sensible to note here that the reason Gordon Brown isn't currently Prime Minister, with a sizeable majority, is because the Conservatives - George Osborne to be precise - surprised us all with a pledge to raise the Inheritance Tax threshold to £1 million. IHT is currently the largest wealth tax levied by Westminster, and Conservatives fought to cut it dramatically. "The death knell to death taxes," was the phrase I believe, which reversed polls over night and spooked Labour away from an early election. Conservatives, if I recall, also promised to cancel the revaluation of Council Tax, and have continued to fight that wealth tax with increase limits, referendum triggers and economy drives. Among this trend increasing wealth taxes seems rather alien, and judging by the reaction to increasing the Inheritance Tax threshold - near universal jubilation - anything but sensible electorally. I'd also point out that there's no such thing as "unearned wealth": someone had to earn it initially, and they've invested it - itself an activity - with the intention of spending it later or gifting it upon death; if we accept the premise of "unearned wealth" we open the door to an assault against all investments, inheritance and gifting, undermining the family in doing so.

None of this however explains why taxing wealth is so unconservative, yet the more I think about it the more unconservative it seems. Now you can call me sentimental, or traditional, or even moralistic, but I believe that there is a way of doing things and living life - the conservative way - that is the right way; further, I believe that the State should ensure that it never hampers that way of living, and uses its position as a pulpit from which to encourage that way. This way is I'm sure very familiar to readers here: it's the lifestyle of investing in yourself through education, hard work in a career or enterprise, saving by investing and/or buying a home, assisting children and/or grandchildren so that they may have better futures, and planning for an eventual retirement where your accumulated wealth can fund both enjoyable years as well as your needs. It's the way in which we are self-reliant to the maximum degree possible, the way in which we avoid becoming burdens on the State; it is, and I am unrepentant in saying this, the right way.

If we are to tax wealth however what we are saying is the reverse: we are saying that if you work hard, do the right thing, and accumulate wealth to fund your retirement years - and maybe kickstart your children and grandchildren - then we will tax you; if however you decide not to invest, not to save, and instead spend your cash on foreign holidays and designer trainers then you won't be taxed. "Have another beer," in effect. It's a recipe for disaster politically and economically.

Those that do the right thing are already penalized - pay extra to have a good pension and you'll lose your Council Tax discount, own a house and it'll be sold to fund care others get free, etc - but codifying this unfairness in the tax system is a step too far. Wealth taxes aren't conservative: they never have been, and they never will.