Welcome to Gary's Economics today we're going to talk about 

the perfect tax which is not a tax at all the 120-year wealth time limit

okay so I want to do a video on an idea called  "The Wealth Time Limit" because I think it's  

super interesting but it also explains a little  bit well I think it answers a couple of the most  

common questions that we get on this channel  which are do you want to raise my taxes and  

why do you want to increase taxation on the  rich and also another one which is what do  

you think is the best way to tax the rich so  um a few years ago I made this website called  

wealth economics and I really recommend looking  at it if you're interested in understanding  

basically why is I care so much about wealth  inequality and also what wealth inequality  

does to the economy from the perspective of ordinary families and ordinary people's lives  

and a lot of people ask me when I put  that website up 'well how do we fix it?' and  

you know I had the long think about what would  be the best way to fix wealth inequality and  

I came up with this idea called 'The Wealth Time  Limit' and the idea behind the wealth time limit is  

you can make as much wealth as you want you  don't pay tax on it you can give it to your  

kids you can give it to your grandkids  but once you hit your 120th birthday  

wealth is gone basically so when you give it  to your kids it's in a trust which has your  

120th birthday on it because your grandkids  has your 120th birthday on it which means  

basically you can give as much wealth as you  want to your kids your grandkids even your  

great grandkids but it has to be spent by your  120th birthday now what is nice about this is  

that it's a zero tax solution right there's no  tax there it's a time limit so say you inherit  

10 million pounds from your granddad um and  your granddad was 80 years old you know you've  

got 40 years to spend that 10 million pounds and  since you know exactly the time limit you'll make  

sure that you spend all that money before the  time limit so what is interesting about this is  

a zero tax solution simply a time limit nobody  is getting taxed here but what does happen is very  

very wealthy people they know that they have  a fixed amount of time with which they need to  

spend all of the wealth that they've accumulated  and just to make it clear they can't just spend  

the money buying houses if you buy a house it  stays in a trust or buying stocks such as it  

stays in the trust you basically if you inherit  huge amounts of money you are forced to spend that  

money over time and what that means is very very  wealthy families will have to enormously increase  

their spending so if you consider us you know  a family that is worth you know a billion quid  

you know like Rishi Sunak's family you know  Rishi Sunak is I guess he's sort of 45 or something  

they would have 75 years to spend a billion quid  and that's really difficult actually because even  

over 75 years you're going to need to spend more  than 10 million pounds a year to run that down  

and that's not accounting for the fact that  Rishi Sunak probably makes from that money  

30 million-40 million pounds a year so  what it means is super rich families  

have the massively massively increase their  spending and this would have the consequence of  

massively increasing wages for working people  because you'd suddenly see a huge amount of demand  

for goods and services because these rich people  would suddenly be spending huge amounts of money  

what it would also do is make assets like housing  like stocks and shares suddenly much much more  

affordable for working people because on the one  hand wages have gone up a lot on the other hand  

rich people very rich families would know that  they can't simply sit on huge amounts of wealth  

and grow it over time they have to sell that  which means that wealth is going to go back into  

the economy back to working people so it would  create an economy where wages are super high where  

ordinary workers can afford things like houses and  property and basically where ordinary people can get  

rich off the back of work and I think this shows  that really what matters is that wealth flows  

around the economy not just from ordinary families  to the rich but from the rich back to ordinary  

families because at the moment we have a system  where over time I think it's becoming clearer  

and clearer that the wealth of ordinary families  is becoming smaller and smaller and smaller over  

time over generations and and that is passing to  the wealth of the rich and the very rich and if  

that happens then it's obvious ordinary people  will get poorer and living standards will fall  

but if you have a time limit it forces the rich  to send that wealth back through the economy and  

it means that working people will be able to  access that wealth and get rich themselves and  

um I think what this shows is that it's not really  simply a question of do you want High tax or do  

you want Low tax it's a question of do you want  an economy where the rich get richer and ordinary  

people get poorer or do an economy where everybody  has the opportunity to get rich if they work  

um and I think what this shows is I'm not in  this because I want to raise taxes I'm in this  

because I want to improve living standards  for ordinary people but I firmly believe  

on the basis of what I've seen and what I've  done in my career that the only way to do that  

is to create an economy where wealth flows around  rather than where wealth simply flows upwards  

so um yeah that's the idea it's the wealth time  limit I think it's really interesting to see that  

you can make a really thriving economy even with  the low tax economy if you force the rich to give  

assets back to working people over time um this  is not at all to say that I'm opposed to any of  

the policies which increase taxation of the rich  I'm super supportive of those policies because I  

know that if nothing is done to get wealth flowing  from the super rich back to ordinary families  

then we are going to see the economy get worse and  worse and worse over time but it's simply to show  

it's not simply a question of high tax or low  tax you know you could have an economy which  

is high tax on the rich and very low tax and  ordinary workers and that would be much better  

than the economy now which is actually often high  tax on workers and low tax on the very rich  

or you could have an economy which is you know  very low tax on the rich but forces the rich to give

that wealth back but at the moment what we have is very low tax on the richest, high tax on workers

and no mechanism to get wealth flowing back  around and if that's what you have it's inevitable  

that wealth will flow from ordinary people to the  rich and the economy will get worse and worse so  

um yeah there were time limit is a nice idea it's  just an idea for you to think about to realise that

what really matters is not so much the level  of tax but really the balance of power in the  

economy and the direction of travel at the moment  we have an economy where the rich are extremely  

powerful and they're getting richer & richer & richer  ordinary people are getting poorer & poorer  

over time and that will obviously lead us to a bad place but it's not inevitable there's lots of ways

to think of... there's lots of ways to fix it & lots of ways to think about it so something to think about

put a comment; let me know what you think um and uh yeah I hope you found it interesting

*i have a question... if we use this time limit... it sounds like a good idea for the long term*

*but in the short term... would it really change anything?

well it would! if it was actually implemented well 

because if you for the very... if you're a very rich family you know if you are 50 years old  

and you're a billionaire you know 70 years is not a long time to spend a billion quid 

so the very rich families would have to start spending straight away from now because  

they know that you know we have to we have to we have to spend that money  

we can't we can't keep it forever so it would  create an enormous immediate economic stimulus

*part of the problem you've described already... but  wouldn't they just spend it on our mum's house?*  

well this is the thing if you the idea is anything you buy with the money in the trust stays in the trust  

so if you use the money to buy somebody's house  it doesn't solve your problem right because you  

need to anything you still have in there when  you hit 120 is gone so it it doesn't make any  

sense whether it's to use that to buy assets  because they can't keep them the idea is basically  

you have to sell those assets back into the economy you have to keep those assets moving around

*that makes sense, I can't think of any other questions* it's all right, it's no problem, great idea, also check out

www.wealtheconomics.org if people are interested it's this good website it's went up a long time ago  

it's really nice; nicely explains the ideas

housing could be so much more affordable wages  could be so much higher and we could have so  

many more options in how we live our lives some  of them put a lot of money into paying Economist  

and think thanks to tell you that inequality  is important for the economy that is not true