On Taxing Wealth – Explaining History

Episode Summary:In this episode of Explaining History, Nick takes a deep dive into the history and necessity of taxation, connecting the Tudor reign of Henry VII to the modern crisis of inequality in the UK.With the Green Party surging past Labour in recent polls by promising to "tax the rich," we explore why this idea is about more than just funding public services—it's about democracy itself. Nick draws a parallel between the "overmighty nobles" of the 15th century, whose private armies threatened the crown, and today’s billionaires, whose vast wealth allows them to purchase political influence and bypass democratic norms.From the dismantling of the post-war social democratic consensus to the devastating impact of austerity (or "de-development") on British society, we ask: Can a society survive when capital has captured the state?Key Topics:The Green Surge: Zack Polanski and the political shift to the left.Henry VII’s Strategy: How taxing the nobility prevented civil war and consolidated power.Rentier Capitalism: Why "lazy money" prefers property to innovation.Austerity as De-development: The stealth privatizationPrivatization Full Description:The transfer of ownership, property, or business from the government to the private sector. It involves selling off public assets—such as water, rail, energy, and housing—turning shared public goods into commodities for profit. Privatization is based on the neoliberal assumption that the private sector is inherently more efficient than the public sector. Governments sell off state-owned enterprises to private investors, often at discounted rates, arguing that the profit motive will drive better service and lower costs. Critical Perspective:Critics view privatization as the “enclosure of the commons.” It frequently leads to higher prices for essential services, as private companies prioritize shareholder returns over public access. It also hollows out the state, stripping it of its capacity to act and leaving citizens at the mercy of private monopolies for their basic needs (like water or electricity).
Read more of British life.The Threat to Democracy: How extreme wealth inequality destabilizes nations.Explaining History helps you understand the 20th Century through critical conversations and expert interviews. We connect the past to the present. If you enjoy the show, please subscribe and share.▸ Support the Show & Get Exclusive ContentBecome a Patron: patreon.com/explaininghistory▸ Join the Community & Continue the ConversationFacebook Group: facebook.com/groups/ExplainingHistoryPodcastSubstack: theexplaininghistorypodcast.substack.com▸ Read Articles & Go DeeperWebsite: explaininghistory.org Hosted on Acast. See acast.com/privacy for more information.

Taxation is often discussed in dry, technocratic terms. It is the price we pay for civilization, the mechanism that funds our hospitals, schools, and roads. However, in the current political climate—where the Green Party is outflanking Labour by demanding we “tax the rich”—it is worth remembering that taxation has a far more primal function: the preservation of power.

To understand why we must tax billionaires, we shouldn’t just look at economic textbooks. We should look at Henry VII.

The Lesson from Bosworth Field

When Henry Tudor seized the throne in 1485, he was a king in name but not in means. Having spent years in exile, he returned to an England dominated by powerful nobles—men who owned vast tracts of land, commanded private armies, and had enriched themselves during the chaotic Wars of the Roses.

Henry realized that these “overmighty nobles” represented an existential threat to his reign. He couldn’t fight them all; that would simply restart the civil war. Instead, he used the tax system and fines to systematically reduce their wealth and power. By the time he died, the Crown was solvent, and the nobility had been brought to heel. He understood that sovereign power cannot coexist with private entities that are too big to fail—or too big to control.

The New Feudalism

Fast forward to the 21st century, and we are once again living in an era of overmighty nobles. Today, they are not barons with castles, but billionaires with hedge funds and media empires.

The argument for taxing the ultra-wealthy goes beyond funding the NHS (though that is crucial). It is about preventing the capture of the state. When an individual like Elon Musk can donate $250 million to a political campaign—a fraction of his net worth—he isn’t just participating in democracy; he is buying it.

In the UK, we have seen a shift toward what I call “Rentier Capitalism.” Unlike the industrial capitalism of the past, which built factories and infrastructure, modern capital is often “lazy.” It seeks out existing assets—housing, utilities, public services—and extracts rent from them.

Austerity as De-development

This dynamic was accelerated by 15 years of austerity. As commentators like Novara Media have noted, austerity wasn’t just belt-tightening; it was a process of “de-development.”

Local authorities were stripped of funding, forcing them to sell off public assets—libraries, swimming pools, community centers—often to private equity firms. Services that were once public rights became private commodities. This represents a massive transfer of wealth upwards, from the public purse to the asset-owning class.

The result is a society that feels increasingly Dickensian. We have 40% of the population living in poverty, and a generation of children whose growth has been stunted by malnutrition and the two-child benefit cap. Meanwhile, the wealth at the top has exploded.

The Social Contract

Social democracy, from Bismarck to the post-war consensus of 1945-1975, was designed to save capitalism from itself. By ensuring that the poor had a stake in society, governments steered populations away from revolutionary solutions.

However, since the IMF loan of 1976 and the subsequent Thatcherite revolution, that consensus has been dismantled. We have returned to a system where extreme wealth is not just tolerated but celebrated, even as it corrodes the foundations of our democracy.

Taxing the rich is not “the politics of envy.” It is a necessary corrective to ensure that no single interest becomes powerful enough to dictate terms to the rest of us. If we do not address this imbalance, we risk a return to the instability that Henry VII fought so hard to suppress. The overmighty noble is back, and this time, he owns the platform you’re reading this on.

Transcript

Nick: Hello there and welcome again to the Explaining History podcast.

Today I want to talk a bit about tax—the death knell of all interest in conversation, perhaps, but an important topic nonetheless. I want to situate it within the context of contemporary UK political discourse around taxation and inequality.

The Green Party has taken a leftward move recently, flanking the Labour Party on the left in virtually every regard. In several opinion polls, they are now more popular than Labour. The stated aim of the Green Party is to replace Labour as the party of the Left. This isn’t particularly hard when you have Keir Starmer echoing Tory ideas, which themselves were designed to chase Reform UK ideas—ideas modulated around the rhetoric of Enoch Powell and the far right.

Zack Polanski, the deputy leader of the Green Party, has said right from the get-go: “Tax the rich to pay for public services.”

The retort from those who carry water for the extremely rich is usually that the rich do pay tax—all the tax the law requires. But this misses a wider point. Yes, paying tax to fund public services is essential. But there is a deeper reason why one taxes the extremely wealthy. To understand that, we need to look at Henry VII.

Henry VII was a pretender to the throne who returned from exile in France with no money. He defeated Richard III at the Battle of Bosworth in 1485, but when he was crowned, he was relatively poor compared to his nobles. The nobles had vast lands and private armies. Henry realized this was a threat. He didn’t want to restart the Wars of the Roses by fighting them all. Instead, he taxed them.

He realized that the Crown must be sovereign and preeminent. To do that, it must hold the majority of the wealth. He fined and taxed the Yorkists who had fought against him. By the time he died, he sat on a massive cash pile (which his son, Henry VIII, promptly spent).

The lesson is this: sovereign power must prevent the “overmighty noble.”

In the 21st century, we are surrounded by overmighty nobles. People with extreme wealth can buy political power cheaply. British politicians are relatively inexpensive to purchase compared to other countries. Both the Conservatives and Labour seem proud of their closeness to private capital.

This is the first reason to tax the rich: billionaires represent an existential threat to democracy because they can buy it. Elon Musk, for example, donated hundreds of millions to influence the US election—a fraction of his wealth, yet enough to potentially sway a presidency.

The second reason concerns the concentration of resources. We exist in a “rentier capitalist” society. We are no longer in the heyday of industrial capitalism. Instead, we have places where “lazy money” hangs out. “Lean money” takes risks in engineering or biomedicine. “Lazy money” buys property and extracts rent. Unless we tax this rent-seeking class, they will continue to ring-fence crucial resources and charge us for access.

This dynamic explains the huge donations to figures like Nigel Farage. The donors know a Reform government would be chaotic, but they also know it would be an attack dog against anyone threatening private capital.

Right-wing think tanks and media outlets have successfully shaped public discourse to make us believe that taxing billionaires will somehow impoverish us all—that a painter-decorator has common class interests with a hedge fund manager. This is a mass delusion fueled by relentless propaganda.

Even if taxing wealth doesn’t generate enough to reverse 15 years of decline overnight, it is necessary. Austerity has essentially “de-developed” the UK. It was a massive stealth privatization. Local services—libraries, parks, sports centers—were cut or sold off to private conglomerates. This transferred wealth upwards, leaving us with a “squeezed middle” paying high council taxes for decaying services.

Taxing the rich reduces the political power of those with hundreds of millions or billions in assets. It might sound radical to say they shouldn’t have as much say as anyone else, but democracy relies on equality. When wealth purchases political power, it entrenches inequality.

We have moved far from the social democratic moment of 1945-1975, when inequality was at its lowest. Since the IMF loan of 1976 and the Thatcher revolution, we have gone into reverse. We now live in a society where 40% of the population experiences poverty, and we have a generation of children physically stunted by malnutrition. Meanwhile, extreme wealth consolidates its position.

Social democracy was designed to steer populations away from revolutionary solutions. It is generally believed that such solutions don’t exist anymore. I wouldn’t be so sure.

Thanks very much for listening. I’ll catch you on the next Explaining History podcast. All the best. Bye-bye.