COULD A WEALTH TAX WORK?

AS THE Tories, Labour and now Donald Trump plunge the UK economy into crisis, Rachel Reeves finds herself at a crossroads to balance the books does she raise taxes or cut spending in her Autumn Budget? Let's be honest: neither option is appealing. Cutting spending certainly won't be easy. As we saw with the Spring Statement, the backlash against curbs to disability and sickness benefits was fierce.

- By Harvey Jones Personal Finance Editor

Now, pressure is mounting for a wealth tax. Former City trader turned inequality campaigner Gary Stevenson is one of its most vocal supporters, arguing it could raise billions while sparing ordinary taxpayers. The Greens are also in favour.

In many respects, it sounds attractive. It would initially hit only a small number of people, perhaps 20,000 in the first year. The vast majority of Britons wouldn't pay a penny. Advocates claim a levy on UK assets above £10million could raise £24billion annually, to boost public services and help struggling households.

Polling also suggests public appetite for a wealth tax is strong.

More than three-quarters would rather see taxes on the ultra-wealthy rise than face cuts to public spending, according to a YouGov survey for Oxfam.

There are strong arguments against it though. It would be a logistical nightmare. HMRC would have to assess the total wealth of tens of thousands of individuals every year to determine liability. That means valuing everything they own: property, investments, businesses, art, jewellery, even yachts and classic cars.

And it wouldn't stop there. While campaigners claim only 20,000 would pay, thousands more must be assessed to make sure they haven't crossed that £10million threshold in any given year. Since asset values fluctuate constantly, this would have to be done year after year. HMRC would be swamped.

Furthermore, the wealthiest already pay a large share of tax. Just 300,000 people contribute 30% of all income tax revenues, the highest in 20 years. And let's not forget the risk of "fiscal drag". Once a tax like this is introduced, the threshold is unlikely to rise.

The £325,000 inheritance tax nil-rate band, for example, hasn't increased since 2009 and remains frozen until at least 2030. A wealth tax would likely follow the same path, dragging more into its net over time.