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Millionaires Are Begging Governments to Tax Them More

Jun 23, 2023 2:00 AM

Millionaires Are Begging Governments to Tax Them More

A group of multimillionaires say it’s time to get serious about taxing wealth. They argue that this would promote economic stability and benefit everyone.

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Photograph: Dmytro Lastovych/Getty Images

In the summer of 2017, Gemma McGough was unemployed, but also a recently minted member of the UK’s top 1 percent: a multimillionaire from the sale of her company, Product Compliance Specialists. She was in a position where she never had to work again.

Then she read This Changes Everything, Naomi Klein’s book about the impact of capitalism on the climate. It struck a chord. “It was a massive shift in my thinking,” she says. “I sold my Porsche and bought a Tesla. What a cliché, the 911’s got to go.”

In 2019, she founded a new company, Eleos Compliance, modeled on the B Corp principles of transparency and social and environmental accountability. Although she took a salary, the majority of her money now came from investments, bonds, and rental properties—from wealth.

Suddenly swamped with scaremongering mailers from accountants offering legal loopholes to reduce her tax bill, McGough analyzed the tax she was paying on her salaried income versus the lower rates on income from the sale of assets. She reached two conclusions: first, that the country’s tax policy was unfair, and second, that she could be contributing more. Yes, she had worked long hours over 20 years to build her first business, but lots of people worked hard only to be left with “a mortgage and many more hours to work.”

Philanthropy wasn’t enough. McGough and her husband have given away approximately £400,000 ($509,946) in the past three years, mostly to reforestation, rainforest conservation, and strategic land purchases. “It’s a lovely thing to do, it’s a pleasure,” she says. “But ultimately it’s not the answer when you need a system-level change.” So in 2021, McGough became one of four British “wealth-holders” to join the UK branch of Patriotic Millionaires, a group of multimillionaires and billionaires who want governments to tax them more.

The organization was set up in the US in 2010 and now has 240 members there; McGough is a founding member of the UK arm, which has grown to 20 members. They attend monthly meetings, coordinate media activity via WhatsApp, and advocate for taxes on net wealth at parliamentary events. It’s a mix of founders and CEOs; uncomfortable heirs; and reformed financiers, such as Citibank trader turned inequality YouTuber Gary Stevenson.

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They bring together connections, financial and tax expertise, status, access, and a few famous names—including the entertainment scion Abigail Disney. Actor Mark Ruffalo is a signatory on the recent “Cost of Extreme Wealth” open letter that was delivered to the World Economic Forum’s Annual Meeting this January. Phil White, a British former consultant and engineer, added a classic campaigning tactic to his Davos trip: holding up a cardboard sign saying “Tax the Rich.” There’s also increasing coordination with Taxmenow in Germany, Austria, and Switzerland, and the Copenhagen-based Millionaires for Humanity.

On both sides of the Atlantic, the Patriotic Millionaires are notable for being unusually public and unusually frank—US chair Morris Pearl, a former MD at investment firm BlackRock, has described how the Covid-19 pandemic made him personally wealthier, and how he doesn’t check his bank balance because he doesn’t need to.

Why speak up when you’ve won the game? McGough admits that her “hard up” working class background might make her more likely to feel that she now has “enough.” She left school for her first job at 16 and set up her first company with her ex-husband with “two laptops and a list of contacts.” Luck and timing played a role—her RF compliance company ended up being part of a growth industry, and the ability to hire workers from the European Union contributed to her success.

The Patriotic Millionaires are eager to stress the economic case that wealth taxes could increase stability and help sustain both a healthy, educated workforce and a middle class of consumers with disposable income—so paying more tax could end up being good for wealthy businesspeople. For McGough, though, it’s about fairness and common sense in an era of widening inequality and deteriorating public services. The richest 1 percent of Brits hold more wealth than the poorest 70 percent combined. “I see it as a problem if you’ve got so much money that you no longer need a functioning society,” she says. “The country needs the super rich to be paying a proper share of taxation.”

The million-dollar question, then, is how much tax?

The group bases its proposals on research into wealth taxes and inequality, with an added dose of pragmatism: “Inheritance tax will never change,” says McGough. In the UK, the group is calling for an annual wealth tax of 1-2 percent for wealth above £10 million, which would affect around 20,000 people but could generate up to £22 billion a year, according to analysis from the Wealth Tax Commission at the LSE and the University of Warwick. That would be almost enough to give the entire public sector a pay increase in line with inflation.

Although wealth taxes are not a new idea, many of these taxes were removed in the 1980s and 1990s, and only four European countries—Spain, Norway, Switzerland, and Belgium—collect net wealth taxes, with levies in France and Italy on selected assets.

The cases against a wealth tax range from “I pay enough already,” which McGough says she has encountered a lot, to arguments around administrative costs, the risk of capital flight, and the potential increase in tax avoidance and evasion. It was a mix of bureaucratic issues and fears of a crisis of confidence in the markets that prevented Harold Wilson’s government from introducing a UK wealth tax in the 1970s.

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As for capital flight, it’s conceded that some wealthy individuals may leave or move their money as a result of tax increases. But analysis by Cristobal Young, an assistant professor of sociology at Stanford University, suggests that the majority would remain. While 5 percent of billionaires live a transnationalist lifestyle between London, Switzerland, and tropical tax havens, the remaining 95 percent live in the country where they were born, educated, or started their business.

A new class of conscious multimillionaires—the UK arm has yet to snag its first billionaire—are leveraging their access to directly advocate for new wealth taxes to all-party parliamentary groups, partnering with Tax Justice UK. Events focused on tax and investments and social mobility are planned for 2023, though the group is generally opposed to this kind of influence of wealth on politics via private lobbying and its undermining of trust in democracy. For now, the invitations to Westminster are viewed as a necessary evil.

Perhaps the moves are also a signal that self-interest extends beyond the business case. As some billionaires build luxurious bunkers, American members like investors Nick Hanauer and Karen Stewart are preoccupied with pitchforks and the fates of Marie Antoinette and the Romanovs.

The Patriotic Millionaires’ plea to tax the rich could cut through precisely because it comes from the wealthy themselves. Researchers from King’s College London and the University of St. Gallen, Switzerland, surveyed the history of wealth taxes in 2021, with data from 1880 onward across 45 countries. They found that the forces of democratization and modernization, and even the outbreak of wars, do not usually speed up the introduction of wealth taxes. Instead, they have mainly been used as an emergency tax when countries faced the shock of an economic recession. As with McGough’s own success in business, timing might be everything.

This article was first published in the May/June 2023 edition of WIRED UK

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