Welcome back to Gary’s Economics.

Today we are going to talk about

Rishi Sunak’s taxes and how the rich live.

Okay.

So I wanted to do a video on

a story that came out a couple of months ago

about Rishi Sunak’s tax return,

because I think that the way

it was reported in the media was,

it totally didn’t tell us the true story.

Focused completely on the wrong thing

and I think we can learn a lot

about how the rich live,

what rich people's lives are like,

and what real wealth is like by looking at this story.

So this story, some of you might have seen it.

It came out in the beginning of February,

and it was about Rishi Sunak releasing his tax return.

And all of the

newspaper reports focused exactly on the numbers

and the percentage rate of tax that Rishi Sunak paid.

So I've got the story here.

I'm looking at the BBC version of the story

and it says here Rishi

Sunak paid UK tax of £508,308 on an income of

just over £2.2 million,

which means he paid a tax rate of something

like 23% or something like that.

And the story, basically

everyone ran the same version of the story,

which was Rishi

Sunak is paying 23% tax

and ordinary high earners are paying 40

or maybe 50% tax, once you include national insurance.

And as soon as I saw this story,

the thing that jumped out at me was not

Rishi Sunak's rate of tax that he paid.

That is not unusual.

In fact, most

very wealthy people pay

a lot lower rates of tax than that.

The thing that jumped out at me was one number

was obviously immediately wrong in this story,

and nobody mentioned it.

So I've spoken a lot about Rishi Sunak’s net worth

on this channel,

Sunday Times rich list had Rishi Sunak's net worth

something like £730 million.

The most recent one,

I think that it came down to £550, £560 million,

something like that.

Now imagine let's take a conservative estimate

that the real number is £500 million.

In reality, it's probably higher

because rich people often hide their wealth.

But let's take a conservative estimate £500 million.

Imagine you’re Rishi Sunak. £500 million.

What is going to be your net passive income?

Your passive income you’re getting from £500 million.

But at the moment Bank of England

base rate is about 5%.

You could get 5% interest rates on a savings account.

So if Rishi Sunak was to take his £500 million

and put it into a savings account,

he would be making £25 million

a year passive income.

He's not including his payment

he gets for being prime minister, anything like that.

£25 million a year passive income.

How can it be

that a man who makes £25 million

a year passive income,

only makes £2 million a year?

It just it doesn't make any sense to me.

And as soon as I saw that number,

as soon as I saw that article,

I really wasn't interested in the tax rate he paid.

I was interested in

how can it be that his reported income is so much less

than what he's really income is?

So I can basically tell you now

the reason why his reported income is so low.

Number one is because very wealthy

people like Rishi Sunak,

most of their wealth is in assets,

and in many cases, most of their income

from wealth comes in the form of capital gains,

which is the price of their assets going up.

And capital gains only get taxed

when you sell the asset.

If you don't sell the asset,

then this is what's called unrealised capital gains.

It doesn't get taxed in our system.

So there's no tax payable.

And basically

if you hold a load of assets

and the prices go up

and up and up, as long as you don't sell anything,

then you don't have to put anything on your tax return

at all.

So, you know, Rishi Sunak,

the only reason that his income is even

£2 million is because he happened

to sell

a lot of stock in the US investment fund that he had,

which netted him a £1.8 million capital gain.

If he didn’t sell that,

then his income would only have been...

It says it here, £400,000.

So the first thing is rich

people can very, very effectively hide their income

by owning assets.

That the price goes up

when they don't sell the assets.

You know, even if we have to accept that Rishi

Sunak’s income is £2 million,

he will never have to sell any assets.

If you

make £2 million a year,

you don’t have to sell anything,

which means you don’t have to declare anything,

which means you have to pay tax on anything.

But the real reason, the main reason

why Rishi Sunak is able to declare such a low income

is because most of Rishi Sunak’s

family wealth is owned by Rishi Sunak’s

wife,

and Rishi Sunak's wife

who has had many articles written about her

in many cases doesn't pay any tax

because she was a non-dom,

a lot of her income is overseas.

She doesn't have to pay tax on it here.

Okay. Let's explain the situation more clearly. Okay.

So Rishi Sunak is on his own,

a relatively wealthy man.

It's difficult to know exactly how these Rishi Sunak’s

wife is enormously, unbelievably wealthy.

She's worth half a billion pounds, maybe £1 billion.

Rishi Sunak’s wife's father-in-law

is one of the richest men in the world.

He's worth 3 to £4 billion, something like this.

So Rishi Sunak is declaring £2 million income.

Rishi Sunak's wife,

we know is making something like 30 or £40 million

passive income a year.

Rishi Sunak's wife's

father, he's worth say, let's say £3 billion,

if he's making 5%.

Now these are conservative estimates and normally

very wealthy people make much more than 5%.

If he makes 5% on £3 billion

he’ll be making £150 million a year.

So what you have here is a man, Rishi Sunak,

saying that he makes £2 million a year

when his wife makes

£1 million a week

and his wife’s father makes 3 or £4 million a week.

So what you have here

is a really good example of how

rich people

live, essentially,

which is the money is held in the family,

they make enormous amounts of passive income.

Their work income is basically irrelevant,

but they only pay tax on their work income

and they only show you their work income.

And I think this is...

It's a fascinating

example, really,

of how effectively

the rich are able to hide their income.

So imagine you’re Rishi Sunak,

some people will say, listen, that's not his money,

It's his wife's money.

Imagine you’re Rishi Sunak and you're getting paid

something like £200,000 - £300,000

a year to be prime minister.

Your wife makes £1 million a week,

your father-in-law makes 3 or £4 million a week.

What are your financial interests?

You know, you get paid up

a couple hundred grand a year to be prime minister

and your wife make £1 million a week.

Her dad makes £4 million a week.

What are your financial interests?

Are your financial interests

to take care of the country?

Or are your financial interests

to do what your wife and your father-in-law say?

I've never met Rishi Sunak.

He could be a perfectly nice guy.

He could be someone who doesn't care about money.

He could be someone who doesn't care

about his financial interests.

But people who don't care

about their financial interests don't normally

work for Goldman Sachs,

then go do a business degree at Stanford

and then marry the daughter

of one of the richest men in the world.

So I think what you see here

is how the rich live.

They own everything,

but they basically hide it in their taxes.

They hide in their tax returns.

I think probably the most

interesting thing about this article

is how the media completely bought it.

When I saw this,

the only interesting thing in this article

is that Rishi Sunak's income is wrong,

£2.2 million, which is Rishi Sunak declared

income is nothing for Rishi Sunak’s family.

It's meaningless for Rishi Sunak’s family.

They make twice that

every single week in passive income.

It's totally meaningless.

And I think

this makes me think of the first time

Rishi Sunak came to prominence,

I was very interested because

I'm a student of history.

I'm very interested in medieval history,

and I'm also obviously very interested

in economics and politics.

And anyone who's interested

in economics and politics will know

political parties are funded

in many cases by rich people.

They have very rich funders, which means that

when they make their decisions,

when they make their policies,

they have to be very careful not to upset rich people

because they get a lot of their money

from rich people.

they have to be very careful

not to upset the newspapers,

which in many cases are owned

by extremely rich people,

because they upset the newspapers,

then the newspapers can turn the public against him,

and they’ll lose elections.

So what this means is for,

you know, for a long period of time,

wealthy people have influenced political parties

from behind closed doors.

And this is a very

useful position for a rich person to be in,

because you can basically dictate the policies,

you can keep your own taxes low, for example,

and you don't have to give up your anonymity.

So these guys can live lives of luxury.

They can kind of control the political system,

and you don't even have to know who they are.

So it's a great situation for them to be in.

when Rishi Sunak came out and became chancellor

and latterly became prime minister,

it was interesting for me

because why would you want to be the prime minister

take a load of sh*t, lose a load of privacy

when the rich were already controlling policy anyway?

Not only is it a load of work and a load of hassle

that Rishi Sunak doesn't need,

it makes it

increasingly obvious to the general public

what was previously kind of hidden,

which is that rich people control policy.

And this kind of reminds me

of the thing that happened in history

back in the sort of 1200’s, 1300’s

when a lot of wealthy,

when basically when banking

was invented in Europe, especially in Italy,

a lot of very wealthy families were created

because they started to make a ton of money

from banking.

You had families like the Medicis in Florence.

We have the banking families of Genoa, in

Venice, these very wealthy banking families,

they made a huge amount of money

and they became as rich as kings.

And at that time, kings sort of ruined everything.

But they weren't really respected

because they weren't from aristocratic families.

So what did they do?

They started to think, how can we use our money

to buy prestige, to buy respect and to buy power?

And they started to do things like, well,

what I'm going to do is

I'm going to give my banking empire to my first son,

and I'm going to use my second son

and my third son, my daughters,

to try and marry into power, basically.

You know, I'm going to try and

marry my daughter to the King of France

to try and get her powerful.

I'm going to try to get my son to be pope,

this kind of thing.

We're going to try to use our family

to build connections

and really, Rishi

Sunak came

in, what I saw was an extremely wealthy man thinking,

well, I'm going to give my empire to my son.

Maybe I can use my daughter

to effectively become prime minister of England.

And if you consider Rishi Sunak,

he's making

£200,000 a year from being prime minister

and he's making £3 million

a week from being part of one of the richest

families in the world,

what are his financial interests

and who is he really working for?

I think this is the big question

that needs to be asked here.

But I think

the most interesting thing here is basically.

Number one.

The wealthy are hiding their wealth,

Rishi Sunak is hiding their wealth.

They're not paying enough taxes.

But number two, they are trying to rebrand themselves

as a kind of aspirational kind of normal, because...

So Rishi Sunak,

all of his income,

his all of his wealth

is tied up in stocks and shares

that he

can basically release as much income

as he wants by selling assets year by year.

He's chosen this year

to release £2.2 million of income.

When we know that that could have been £300,000,

it could have been...

It could have been £50 million if he wanted.

He's chosen to say my income is £2.2 million.

I think that is actually

a tactical choice for Rishi Sunak,

because when he says I make £2.2 million,

what he says is, I make the kind of money

that a very successful banker makes, that

a very successful businessman

makes, that an ordinary family

aspires for their kids to make one day.

And what he is doing there is he's saying,

I, Rishi Sunak,

who is part of one of the richest families

in the world that makes millions of pounds

every week in passive income, I’m

just like what you aspire your kids to do.

And I think he's trying to basically draw

a connection

between the financial situation of the super rich,

Rishi Sunak’s

family is definitely part of the super rich

and what ordinary people aspire to be.

And,

in reality very, very few people ever make £2 million.

But it is the kind of money

that an ordinary family can aspire to make.

You know,

they're ordinary families

who have

seen the value of their housing

go up to something like £2 million,

especially if you live in a big city like London.

You know, I made £2 million

in one year, despite

coming from a very poor background.

So this kind of money is aspirational,

the kind of money that Rishi Sunak’s family,

is, is totally impossible to achieve.

And what he's trying to do here

is rebrand the wealth of the super rich as the wealth,

the aspirational wealth of the middle class.

And he's trying to build the connection

between the super rich and

an aspirational middle class family.

And the reason he’s trying to do

that is so that when people like me

say, look the problem is the rich,

you need to tax

the rich,

ordinary people like you

who are not super rich

but aspire to own property,

aspire to financial security.

Think I'm going to tax you

because you think that your financial situation

is similar to Rishi Sunak's, but it's not.

So, to conclude.

Rishi Sunak doesn't pay 25% taxes.

He pays virtually 0% taxes

because Rishi Sunak’s family income is not £2 million

a year. It's hundreds of millions of pounds a year.

Because they are billionaires.

They want you to think they're normal.

So that when I say tax the rich, you hear tax you.

These guys get richer and richer every year.

They use their hundreds of millions of pounds

of passive income to compete with you,

to compete with your kids,

for your assets, for your homes,

for the things that you need.

They get richer every year. You get poorer every year.

If you don't tax them.

You are refusing to defend yourself

from the people who are coming for your homes.

You have to tax the rich.

You have to tax people like Rishi Sunak.

If you don't tax them, you kids will be poor.

That's why I do what I do every week.

Tell your friends, tell you mum.

Tax the rich or your kids will be poor.

It's inequality. You've got to fix it. Thank you.