Senedd Debates Wealth Tax: Divided Views on Feasibility and Fairness for Wales

Whilst supporters emphasised overwhelming public backing and international examples of successful wealth taxation, opponents highlighted failed experiments and warned of economic damage.

The discussion also illuminated tensions between Wales-only solutions and UK-wide approaches, with broad agreement that any effective wealth tax would require coordination across the United Kingdom to prevent avoidance through relocation.

The Case for Wealth Taxation

Julie Morgan opened the debate by highlighting levels of inequality and poverty in Wales. She argued that a UK-wide wealth tax, based on proposals from Patriotic Millionaires UK and Tax Justice UK, could raise £24 billion annually whilst affecting only around 20,000 people. She emphasised polling evidence showing substantial public support: "49% of voters would strongly support a wealth tax like this, and a further 26% would further support one." She claimed that 85% of millionaires who would be affected by the proposed tax support it.

Addressing concerns about capital flight, Morgan cited international evidence: "In Norway, Sweden and Denmark, just 0.01 per cent of the richest households relocated after tax reform." She also pointed to Massachusetts, where "there's been an increase in high earners since the millionaires tax was introduced in 2022." (NB. The Massachusetts tax is a levy on high incomes rather than wealth.)

Mick Antoniw (Labour) agreed, calling for “a fairer capital gains tax system”, “a fairer capital transfer tax system”, “a closing of [tax avoidance] loopholes” and a wealth tax of 2%. He acknowledged this would not be easy to put in place. “There are many complications, but it can be designed. Payment can be deferred to the equity value of wealth and property when it is disposed of. It can be done without creating unfairness for those with high wealth but low income. It would raise billions of pounds, and it would begin to restore greater wealth equality in our society.”

John Griffiths said a wealth tax was not “some ridiculous, far-fetched idea, it has been tried in different parts of the world and it is delivering extra income to be used on public services in other parts of the world.”

Conservatives: Wealth Tax has been Tried and Failed

Conservative spokesperson Sam Rowlands MS mounted a robust challenge to the proposal, describing it as "a comprehensive yet ultimately flawed defence of a policy that has been tried and tested and failed across the globe." He argued the tax "is not only impractical to implement, but that it would be economically damaging and is, in principle, a tax on success and on saving."

Rowlands highlighted international examples of wealth tax failures, particularly France, where "they estimated that 40,000 of their millionaires left France linked to the wealth tax regime." He noted that in 1990, "there were 12 Organisation for Economic Co-operation and Development countries that levied the individual net wealth tax. By 2020 this number was just three countries."

On administrative costs, Rowlands cited Ireland's experience, where "the cost of compliance and administration could consume up to 50 per cent of the total tax revenue collected, making it an incredibly inefficient way to fund those public services." He also emphasised existing tax contributions, noting "currently, the richest 1 per cent in the UK pay 29 per cent of the taxes that hit the Exchequer every single year."

Another Conservative MS, Gareth Davies, reinforced these concerns, arguing that "since Labour entered office, a millionaire has left the UK every 45 minutes." He described the wealth tax as a policy that "would be hugely damaging for our economy" and "crumbles under even the slightest of scrutiny." Referencing Colbert’s dictum that the art of taxation lies in plucking the goose as to obtain the largest amount of feathers with the smallest amount of hissing, he suggested that a wealth tax would be akin to slaughtering the goose outright. 

The debate featured significant disagreement over whether wealthy individuals would relocate to avoid taxation. Mark Isherwood MS (Conservative) cited statistics showing "10,800 millionaires left the UK last year, and that's forecast to rise to 16,800 this year," with each potentially representing £394,000 in lost income tax revenue.

Jane Dodds MS (Lib Dem) challenged this narrative, referencing the Patriotic Millionaires' position that "they will not leave. They want to stay and contribute." She argued that "nearly 60 per cent of UK millionaires think it's unpatriotic to leave the country when asked to contribute more."

Plaid Cymru's Support: Addressing Systemic Inequality

For Plaid Cymru Heledd Fychan MS framed the debate as fundamentally about inequality, asking: "do you think that it is immoral that the majority of the world's wealth is in the hands of such a small percentage of the population?" She argued that "the taxation system and the economy, as it currently stands, aren't working for the majority of people."

Sioned Williams MS (also Plaid) emphasised that "taxing extreme, largely static wealth is acknowledged to be among the least economically harmful forms of taxation, because it raises revenue without suppressing wages or discouraging productive investment." She challenged concerns about wealthy individuals leaving, citing LSE research showing that "none of those who contributed to their research intended to move abroad for tax reasons, and the overwhelming majority said that they would never consider relocating because of taxation."

Cabinet Secretary's Nuanced Position

For the Welsh government, Cabinet Secretary Mark Drakeford provided a carefully balanced response, acknowledging both the case for wealth taxation and its complexities. He stated: "High wealth inequality is one of the major challenges of our time. There are many ways in which taxes can be used to collect more from wealthy individuals"—quoting the International Monetary Fund.

Drakeford highlighted extreme disparities, noting that "the wealthiest 25 individuals in the United States face an effective average tax rate of 3.25 per cent" whilst in the UK, "about a quarter of those with annual incomes of over £3 million paid tax of about 12 per cent."

However, he cautioned: "We ought to take seriously, even those of us who believe in the taxation of wealth, the observation that, if it were straightforward, then probably it would have been done sooner and in more places than has been the case to date."

Crucially, Drakeford argued that "for me, wealth taxation also has the democratic advantage of reinforcing unambiguously the case for the United Kingdom as a great engine for redistribution." He suggested two practical measures: equalising capital gains tax with income tax rates, and exploring land value taxation as an alternative to council tax—noting that "60 per cent of wealth in this country is invested in land and property."

Dodds: Moral case is unanswerable

Replying to the debate Jane Dodds criticised the UK tax system for taxing work more heavily than wealth. She said the moral case for a wealth tax was unanswerable: “This isn't about taxing more, it's just about taxing better—taxing fairly, rewarding work, investing in the next generation”.

Quoting Adam Smith she said: “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.” A wealth tax is “a promise of a fairer, more prosperous Wales, a Wales that works for everyone, not just the fortunate few,” she concluded.

Read the full debate here.