Since the Great Recession, there has been a drive among Western government bodies to identify more viable forms of long-term funding. This has been prominent in both the UK and the U.S., who have suffered significant economic contraction in recent times and faced a series of financial meltdowns.
One of the most popular and topical solutions is the introduction of 'Millionaires Tax'. This is a special rate of taxation that is targeted at exceptionally wealthy individuals, who would be required to reinvest more into the economy and drive state or local government spending.
While this idea is relatively simple, however, its potential implementation is fraught with pitfalls and ethical questions. While the precise rate of Millionaires Tax is not fixed it would vary according to law-makers in each individual region. A November ballot in the American state of Illinois asked voters to approve a non-binding resolution that would drive an 8% increase in the existing highest tax rate. If a similar rate was approved in the UK, the nations' highest earners would be forced to pay nearly 50% of their earnings in taxation.
The cumulative value of such a move would be significant, as would the impact on high earners who have an existing lifestyle to maintain. When you consider the cost of living and price of property in high value regions in the UK, for example, paying out an extra 8% or 10% in monthly taxation will dramatically reduce each individuals level of disposable income. This may pose financial challenges even for high earning citizens, especially as their lifestyle and outgoings will be tailored to suit their existing financial circumstances.
Beyond the practical impact of Millionaires Tax, there is also an ethical issue that is hard to ignore. More specifically, capitalist and democratic nations such as the U.S. (and to a lesser extent the UK) are built on the principle that each individual is empowered to work hard and build their own personal wealth. This is diametrically opposed to the values of communist countries, where all accrued wealth is evenly distributed between both rich and poor members of society.
With this in mind, it seems highly unethical that capitalist government bodies should be able to place a specific levy on their highest earning subjects, especially when their political philosophy empowers individuals to work hard for the benefit of them and their families.
While the implementation of Millionaire's Tax may make sound financial sense, it is ethically questionable in countries that are driven by the fundamental principles of capitalism. It would also be highly difficult to enforce, as government bodies would most likely face a legal backlash from citizens who are unwilling to pay an additional tax aimed at the highest earners.
This aside, it does provide government officials with a popular and topical issue that can boost their popularity, particularly as it appeals to lower earning families and those who would like to see their own tax liability reduced.