Sam Morgan came out stating that he feels his tax bill was too low. While I respect the idea that the current tax system does not match his idea of what is equitable, I am not sure that he has gotten off with as much of a free ride as he’s suggesting.
Why? Well for one even though he isn’t paying income tax on his current stock of wealth, he does pay a consumption tax. I would hardly call 12.5% a “minimal” amount of tax.
Furthermore, lets think about how this capital gain was created.
- Mr Morgan had to invest, take on risk, he had to pay tax when buying in goods (if they were final goods), or accept that there was a tax on the final goods that he sold.
- The income that Mr Morgan earned in order to invest in the business would have either been borrowed or would have involved him building up a stock of wealth by working (and thereby paying tax). If the money was borrowed, then the initial person that built up the capital would have had to have paid income tax.
- Most importantly, the stream of income provided by the asset is taxed, which implies that the asset value of the capital is in turn lower – when selling for a “capital gain” Mr Morgan was selling the future income stream of the business, taxing that and then taxing the income stream sounds sort of like taxing it twice doesn’t it 😉
As a result, I don’t think the idea that “he hasn’t paid tax” holds up to reason, at all. If there are holes in the tax system somewhere that imply the tax base relies too much on labour relative to what we believe is fair then, hell yea, lets clean it up. But I think Mr Morgan’s case has been heavily exaggerated – he has, and does, face a large lifetime tax bill.
Update: Aaron Schiff makes a similar point.